U.S. economy expands 2.8% as companies restock in third quarter

In this Tuesday, July 16, 2013, file photo, a covered vehicle sits in part of the new paint shop at Chrysler's Sterling Heights Assembly Plant in Sterling Heights, Mich. The Commerce Department issues its first estimate of how fast the U.S. economy grew in the July-September quarter on Thursday, Nov. 7, 2013. (AP Photo/Paul Sancya, File)

In this Tuesday, July 16, 2013, file photo, a covered vehicle sits in part of the new paint shop at Chrysler's Sterling Heights Assembly Plant in Sterling Heights, Mich. The Commerce Department issues its first estimate of how fast the U.S. economy grew in the July-September quarter on Thursday, Nov. 7, 2013. (AP Photo/Paul Sancya, File)

WASHINGTON (AP) — The U.S. economy expanded at a 2.8 percent annual rate from July through September, a surprising acceleration ahead of the 16-day partial government shutdown. But much of the strength came from a buildup in company stockpiling.

Home construction also rose, and state and local governments spent at their fastest pace in four years. But businesses spent less on equipment, federal spending fell and consumers spent at a slower pace. All are cautionary signs for the final three months of the year.

Overall, growth increased in the third quarter from a 2.5 percent annual rate in the April-June period to the fastest pace in a year, the Commerce Department said Thursday.

The third-quarter growth was nearly a full percentage point stronger than most economists had predicted. Analysts noted that much of the unforeseen strength came from a buildup in company inventories. That suggests that businesses overestimated consumer demand.

Restocking contributed 0.8 percentage point to growth — double its contribution in the second quarter.

Sal Guatieri, an economist at BMO Capital Markets, predicts that companies will cut back on restocking in the October-December quarter. He thinks less stockpiling, along with the effects of the shutdown, will slow growth to an annual rate below 2 percent this quarter.

Consumers stepped up spending on goods last quarter, but the pace of their increase weakened to a 1.5 percent annual rate from a 1.8 percent rate in the previous quarter. Spending on services was essentially flat, partly because of a cooler summer that lowered utility spending.

Spending by consumers is critical to growth because it drives roughly 70 percent of economic activity. Higher taxes this year and slow wage growth have weighed on consumers since the start of the year.

Exports rose at a 4.5 percent rate in the third quarter, helped by stronger economies overseas. Still, businesses cut back on investment in equipment by the most in a year.

Overall government activity grew at a slight 0.2 percent rate, reflecting a 1.5 percent rise in state and local government spending — the best showing since the spring of 2009. Federal government spending dropped again, falling at a 1.7 percent annual rate.

Analysts say the shutdown could cut more than half a percentage point from annual growth in the October-December quarter. The shutdown cost the U.S. economy an estimated $24 billion, according to Beth Ann Bovino, an economist at Standard & Poor's.

  • Discuss
  • Print

Related Stories

Comments » 3

MIOCENE (Inactive) writes:

In the days of Ronald Reagan (ie), our economy was more LINEAR; meaning that America was still the controlling world Capitalist power.

Today it is more complicated; where China and the emerging nations have made it more like an competition WEB.
There is a lot more global competition now from the billions of people who entered the free market since the fall of the Berlin Wall.

There is also the social drag of increasing entitlements for the growing number of poor and working poor, resulting from the religious arm of the GOP's war on Planned Parenthood, discouraging birth control, and making harder for poor women to obtain abortion.
There is also the Catholic Church's discouraging of contraception in much of the impoverished Catholic Hispanic population; which immigrated here over the last twenty years which leads to millions of car washers and lawn cutters who can’t support their growing families on minimum wage.

This is leading to even MORE economic overhead; so don't expect a return to the old days of expansion and runaway American prosperity.
The SIMPLE economic factors which made America great in the past; -no longer apply.

Immigration and the defeat of world Communism has changed America; and the world; -forever.
Traditionalists are just going to have to get used to it; and learn to innovate; as many are doing now by making products and selling world-wide from their own websites; working out of their garages and basements.

I don't believe Conservatives understand this; and any attempt to solve today’s problems with yesterday's solutions may make matters worse; a LOT worse.

The poor are having children, the middle class will be paying the bill; while the rich laugh all the way to the bank.
Welfare and Socialism are here forever; and the Middle Class has to adapt by making money in unorthodox, and hopefully legal ways.

The average Middle Class Joe can no longer just get out of high school, work on the assembly line; and make a good living in an expanding economy.
He (or she) has to now THINK and CREATE in order to survive in this new American environment while paying the bills for the parasites and the hopeless; the population of which; thanks to the bible thumpers who control much of our government; is increasing with each year.

MIOCENE

August8 writes:

As it stands now, our government is cr-p.

MIOCENE (Inactive) writes:

in response to August8:

As it stands now, our government is cr-p.

I don't think that it is that bad.

Afterall: The trucks are still rolling, the tourist areas are booked well in advance, the supermarket shelves are constantly being restocked, there is an ample gas supply at the pumps, the mall parking lots are full, the roads are crowded with cars, ninety percent of us are still working at some kind of job, there are waiting lines at restaurants, and people are still buying bottled water. (water; something they can get for free)

But if it is the Congressional make-up leading to governmental inaction that you dislike; things should improve when the GOP finally rids itself of the tea party and social conservatives; and sends them packing back to the Constitution Party where they belong.

MIOCENE

Share your thoughts

Comments are the sole responsibility of the person posting them. You agree not to post comments that are off topic, defamatory, obscene, abusive, threatening or an invasion of privacy. Violators may be banned. Click here for our full user agreement.

Comments can be shared on Facebook and Yahoo!. Add both options by connecting your profiles.

Features