The U.S. economy grew a revised 2% annual pace in the third quarter — a touch slower than previously reported — owing to a larger trade deficit and a smaller buildup in inventories than earlier estimates showed.
The government’s second update on gross domestic product reflected a somewhat worse trade picture in the late summer and early fall. Exports rose a slower 0.7% vs. a prior 0.9% estimate. And imports climbed 2.3% instead of 2.1%.
Companies also rebuilt inventories a bit less than the government had tallied.
The value of inventories increased $85.5 billion, down from a prior $90.2 billion estimate. Inventories had jumped by $113.5 billion in the second quarter when the economy expanded at a much faster 3.9% clip.
Spending on home construction rose at a faster 8.2% pace in the third quarter instead of 7.3%, revised Commerce Department figures also show
Most other figures in the GDP report were little changed.
The increase in consumer spending stayed at 3%, for example, while business investment in structures such as office buildings was nudged up to 2.6% from 2.4%
Previously the government had said gross domestic product rose at a 2.1% annual pace from July through September. GDP is basically the sum of all the activity in an economy and tells how fast it is growing.
The government’s most recent snapshot of how the U.S. performed in the third quarter fall shows little change in the trajectory of the economy.
The good news: Consumers are spending money at a more rapid pace, helped by strong job creation. That’s what is mainly fueling growth since consumers account for more than two-thirds of economic activity.
The bad news: Businesses have scaled back investment in response to sluggish exports, cheap oil and lower profits.
Exports have softened because of a strong dollar and weak global economy, while lower petroleum prices have forced energy producers to hunker down.
At the same time pretax corporate profits, adjusted for depreciation and the value of inventories, fell 5.1%. That marks the third decline in the past four quarters.
Those trends are likely to persist in the final three months of the year despite a recent pickup in some forms of business investment such as equipment purchases. That will constrain an economy on track to grow less than 3% for the 10th straight year, marking the weakest period of U.S. growth since the Great Depression.
The U.S. has expanded at a 2.2% rate through the first nine months of 2015 and the economy is projected to grow at a similar pace in the fourth quarter that ends on Dec. 31.
Even so, the Federal Reserve decided last week the economy was strong enough after more than six years of recovery to warrant the first increase in interest rates in a decade. The U.S. has produced more than 12 million jobs in the past five years to lower the unemployment rate to 5%.
The central bank is not so confident that it’s willing to raise rates quickly, though. The Fed upped its benchmark short-term rate to a range of 0.25% to 0.5% after keeping it near zero for seven years in an unprecedented effort to pump up the economy.
