US Q3 GDP grows at 2%, an upturn from Q2’s mediocre 1.3% pace

26 October 2012 15:02  [Source: ICIS news]

WASHINGTON (ICIS)--The US economy grew at an annualised pace of 2% in the third quarter, the Commerce Department said on Friday, marking an improvement from the second quarter’s mediocre 1.3% growth rate and the first quarter’s 1.9% expansion.

In normal economic times, US gross domestic product (GDP) would be expected to expand at a rate of 3% to 3.5% annually.

In its report, the department said that the third quarter’s 2% GDP advance was attributed chiefly to increased consumer spending, an upturn in the housing sector and federal government spending.

However, some of those gains were offset by third-quarter declines in US exports, business investments in plants and equipment and a downturn in inventories.

The report also showed a downwardly revised assessment of second-quarter growth, which had originally been estimated at 1.5%.

The department said that consumer spending – referred to as personal consumption expenditures (PCE) – rose 2% in the third quarter compared with the second quarter’s 1.5% advance in PCE.

In addition, production of durable goods rose 8.5% in the quarter ended 30 September, a sharp turnaround from the 0.2% decline seen in this key industrial measure in the second quarter.

Housing construction, what the department calls residential fixed investment, rose by 14.4% in the third quarter as the nation’s housing recovery began to gain strength. In the second quarter, residential fixed investment grew at a more modest but still significant 8.5% pace.

In contrast, business investment in plants and facilities fell by 1.3% in the last quarter compared with this segment’s 3.6% advance in the second quarter. Similarly, business purchases of equipment and software fell narrowly by 0.1% in the third quarter, but that small decline is in sharp contrast to the 4.8% gain seen in the second quarter.

US exports also fell in the most recent three-month period, down by 1.6% compared with an increase of 5.3% in the second quarter.

But imports, which count as a negative against GDP growth, also declined in the third quarter, down by 0.2% compared with the second quarter’s 2.8% gain.

Federal spending grew by 9.6% in the third quarter, the report said, up sharply from the 0.2% decrease seen in the second quarter. Part of that gain was a 13% increase in defence spending, also up sharply from the second quarter’s 0.2% decline.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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