US economic growth slows in the third quarter

 
Jessica Morris
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It was held up by consumer spending (Source: Getty)

US economic growth slowed sharply in the third quarter of this year as businesses scaled back investment, according to official data released today.

Gross domestic product grew 1.5 per cent annually between July to September, significantly lower than 3.9 percent in the second quarter, the Commerce Department said. This was primarily due to businesses cutting back on restocking warehouses to work off an inventory glut.

Economists had pencilled in a growth rate of 1.6 per cent in the third quarter.

It comes a day after the US Federal Reserve hinted that a December interest rate rise was on the cards.

Businesses accumulated $56.8bn (£37.2) of inventory in the third quarter, the smallest level since the first quarter of 2014, and sharply lower than the $113.5bn from April to June.

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Consumer spending, which accounts for more than two-thirds of US economic activity, remained robust. It grew at a 3.2 per cent rate after expanding at a 3.6 per cent pace in the second quarter.

Chris Williamson, chief economist at Markit, said: "The slowing had been flagged well in advance by the monthly business surveys and higher frequency data, and is therefore unlikely to have a major impact on policymaking."

"Instead, the Fed will be firmly focused on how the fourth quarter is playing out, writing off some of the third quarter weakness as temporary."

"In particular, third quarter GDP was dragged down by a far smaller accumulation of inventories than in the second quarter, which is estimated to have reduced growth by 1.4 per cent. This could therefore reverse in the fourth quarter as stock levels are rebuilt."

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