Photo: Bloomberg

Photo: Bloomberg

US third-quarter growth revised down to 2.0%

US third-quarter growth revised down to 2.0%

Washington: The US economy grew at a slightly slower pace than previously estimated in the third quarter, but weak inventory accumulation amid sturdy consumer spending strengthened views output would pick up in the current quarter.

Photo: Bloomberg

While the revision was below economists’ expectations for a 2.5% growth pace, the composition of the GDP report, especially still-firm consumer spending and the first drop in businesses inventories since the fourth quarter of 2009 set the platform for a stronger economic performance this quarter.

Data so far suggest the fourth-quarter growth pace could exceed 3%, which would be the fastest in 18 months.

Despite the downward revision, last quarter’s growth is still a step-up from the April-June period’s 1.3% pace. Part of the pick-up in output during the last quarter reflects a reversal of factors that held back growth earlier in the year.

A jump in gasoline prices had weighed on consumer spending earlier in the year, and supply disruptions from Japan’s big earthquake and tsunami in March had curbed auto production.

The government revised third-quarter output to account for an $8.5 billion drop in business inventories, which lopped off 1.55 percentage points from GDP growth. Inventories had previously been estimated to have increased $5.4 billion.

The drag from inventories was offset by strong export growth. Excluding inventories, the economy grew at an unrevised brisk 3.6% pace after expanding 1.6% in the second quarter.

Consumer spending was revised slightly down to a 2.3% growth pace from 2.4% because of adjustments to motor vehicle fuels and lubricants. It was still the quickest pace since the fourth quarter of 2010. However, weak income growth could crimp spending. The report showed real disposable income fell 2.1% in the third quarter after declining 0.5% in the prior three months. There were also small revisions to business investment, which rose at a 14.8% rate instead of 16.3% as estimates for investment in nonresidential structures and outlays on equipment and software were lowered.

The department also said after-tax corporate profits increased at a 3.0% rate after rising 4.3% in the second quarter.

Export growth was stronger than previously estimated, rising at a 4.3% rate instead of 4.0%. Imports increased at a much slower 0.5% rate rather than 1.9%.

Trade contributed almost half a percentage point to GDP growth. Elsewhere, residential construction grew at a 1.6% rate instead of 2.4%. Government spending fell at a 0.1% rate instead of being flat.

The GDP report also showed inflation pressures subsiding. A price index for personal spending rose at a 2.3% rate in the third quarter, instead of 2.4%.

That compared to a 3.3% rate in the second quarter. A core inflation measure, which strips out food and energy costs, rose at a 2.0% rate rather than 2.1%. The measure -- closely watched by the Federal Reserve -- grew at a 2.3% rate in the prior three months.