US economy grew by 2.8% in 3rd quarter 2013

The US economy grew by  2.8% during the third quarter of 2013, compared to 2.5% during the second quarter, the Bureau of Economic Analysis, part of the US Department of Commerce, announced today.

The Bureau stressed that this 3rd quarter estimate is based on incomplete data. The next estimate on Q3 2013 GDP growth will be issued on December 5th, 2013.

The Commerce Department says the US economy grew because of a reduction in imports and an increase in private inventory investment “and in state and local government spending that were partly offset by decelerations in exports, non-residential fixed investment, and in PCE (personal consumption expenditure.”

The increase in private inventory investment, which means businesses restocking shelves, accounted for 0.8% (percentage point) of the 2.8% growth during the quarter.

US economy grew, but no acceleration

So really, GDP grew by just 2% excluding restocking. Economists had predicted that GDP growth would accelerated during Q3 and Q4, this now seems unlikely.

Domestic demand grew by only 1.7%, a relatively modest amount as far as the Federal Reserve is concerned when considering tapering its stimulus program of buying $85 billions’ worth of bonds each month in order to keep down borrowing costs.

In an interview with Reuters, Joshua Dennerlein who works as an economist at Bank of America Merrill Lynch, New York, said “We haven’t seen an acceleration in growth yet that the Fed is looking for to begin tapering.”

Consumer spending grew by just 1.5% in the third quarter, compared to 1.8% in the second. Q3 consumer spending growth was the lowest since Q2 2011.

Economists say in view of this, inventory investment was probably overdone. If this is the case, fourth quarter figures will probably be lower still – also,

the October government shutdown occurred during the fourth quarter.

Consumer spending makes up two-thirds of the USA’s economy.

Business spending dropped, which together with expected figures tomorrow showing a slowdown in hiring in comparison to the first six months of this year, may not bode well for the next quarter.

On October 10th, 2013, Market Business News reported that the US September unemployment rate dropped to 7.2% from 7.3% in August. Economists had expected a greater reduction.