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 Gross domestic product grew at a 2.0 percent annual pace, instead of
the 2.1 percent rate reported last month, the Commerce Department
said in its third estimate on Tuesday.
While that was a sharp deceleration from the brisk 3.9 percent pace
logged in the April-June period, growth remained around the
economy's long-run potential.
The Federal Reserve last week raised its benchmark overnight
interest rate by 25 basis points to between 0.25 percent and 0.50
percent, the first increase in nearly a decade.
The rate hike was a vote of confidence in the economy, which has
been buffeted by slower global demand, a strong dollar and spending
cuts in the energy sector.
"This is not an economy that is just muddling along. The GDP data
today back up the Fed's decision to liftoff this month and paves the
way for more rate hikes early in 2016," said Chris Rupkey, chief
economist at MUFG Union Bank in New York.
While other data on Tuesday showed a surprise 10.5 percent plunge in
home resales last month, economists cautioned against reading too
much into the drop, noting that new mortgage disclosure rules had
caused delays in closing contracts.
The National Association of Realtors said existing home sales
tumbled to an annual rate of 4.76 million units, the lowest level
since April 2014. The drop is in stark contrast to robust housing
starts, new home sales and bullish homebuilder sentiment.
"Demand didn't change, the processing rules did," said Sal Guatieri,
a senior economist at BMO Capital Markets in Toronto. "Look for a
big-time rebound in December, as housing market fundamentals remain
constructive, including falling joblessness, still-low mortgage
rates, easing loan standards and plenty of pent-up demand from
millennials."U.S. stocks were trading higher, also bolstered by
crude oil prices, which eased off multi-year lows. U.S. Treasury
debt prices fell and the dollar weakened against a basket of
currencies.
When measured from the income side, the economy grew at a 2.7
percent pace, not the 3.1 percent rate reported last month, to
account for a modest downward revision to corporate profits.
INVENTORIES STILL HIGH
Businesses accumulated $85.5 billion worth of inventory in the third
quarter, instead of the $90.2 billion reported in November. That
meant the change in inventories sliced off 0.71 percentage point
from third-quarter GDP growth, instead of the 0.59 percentage point
the government estimated last month.
A record increase in inventories in the first half of the years left
warehouses bulging with unsold merchandise and businesses with
little appetite to restock.
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Despite efforts to whittle down the stockpiles of unsold goods,
inventories remain relatively high and will probably weigh on growth
in the fourth quarter. Estimates for fourth-quarter growth are
currently around a 2 percent rate.
"The pace of stockbuilding is still quite rapid and implies a
continued drag on output going forward as firms clear their
shelves," said Michael Feroli, an economist at JPMorgan in New York.
"There is some evidence that this process is well under way in the
fourth quarter, though it could conceivably restrain activity on
into the first quarter."
Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, grew at a 3.0 percent rate in the third quarter
as previously estimated. Spending is being supported by a
strengthening labor market and rising home values. Savings, which
are near three-year highs, and low inflation are also helping to
underpin consumption.
Growth in business spending on equipment was raised to a 9.9 percent
rate from a 9.5 percent pace. There were upward revisions to
investment in residential construction and government spending.
The drag from trade was slightly larger than previously reported. A
measure of private domestic demand, which excludes trade,
inventories and government spending, was revised up one-tenth of a
percentage point to a 3.2 percent pace.
There was a modest downward revision to investment in nonresidential
structures, to account for ongoing spending cuts by energy firms
following a collapse in oil prices.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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