US economic growth slows sharply

US economic growth slows sharply

US economic growth slows sharply

Written by Staff Writer

30 Oct, 2015 | 7:36 am

US economic growth slowed sharply in the third quarter of the year.

Gross domestic product(GDP) grew at an annualised pace of 1.5% between July and September, according to the Department of Commerce, down from a rate of 3.9% in the second quarter.

The slowdown was partly due to companies running down stockpiles of goods in their warehouses.

On Wednesday, the Federal Reserve kept rates unchanged and said the economy was expanding at a “moderate” pace.

Consumer spending remained fairly robust. It grew by 0.8% in the three-month period, or 3.2% in the annualised terms that the US official statisticians prefer.

The big question for markets is, when will the Federal Reserve raise interest rates? Will the central bank think the economy is strong enough to take it? The markets seem to think the new figures have, if anything slightly increased the chances that the Fed will move at its next policy meeting in December.

Low oil prices have hit US energy firms so far this year. But lower fuel prices have been good news for consumer spending, which accounts for more than two-thirds of US economic activity.

Consumer spending grew at 3.2% in the third quarter, down from 3.6% in the second but still a strong reading.

Analysts said that the running down of warehouse stockpiles in the third quarter was likely to be a temporary effect and they expected growth to accelerate again in the fourth quarter.

For several months there has been intense debate about when the US central bank will raise interest rates, and now the focus is on its last meeting of the year in December.

The Fed has said in past statements that it expects to raise rates in 2015, and that labour market participation, inflation and the global economy would be the key factors in its decision.

In its latest statement on Wednesday, the Fed said: “In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2% inflation.”

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