US grows in third quarter but no cheer for jobless
Published 30/10/2010 | 05:00
AMERICA'S economy is growing, but not quickly enough to chip away at its army of unemployed. The news leaves the Federal Reserve likely to print more money next week.
Gross domestic product in the world's biggest economy expanded at an annual rate of 2pc in the third quarter, up from 1.7pc in the previous quarter, according to the Bureau of Economic Analysis.
The report showed that consumer spending had quickened in recent months, with private spending gaining 2.6pc -- the fastest pace since late 2006.
However, construction activity tumbled in the three months, sliding by 29pc and more than reversing the 25pc jump in the previous quarter.
Investment in equipment and software increased by 12pc, a sharp slowdown from last quarter's rate of 29.1pc, suggesting that pent-up demand for replacement capital equipment was now working its way out of the system.
American economic growth remains heavily reliant on federal government spending, which rose a punchy 8.8pc in the third quarter.
Exports are continuing to disappoint, rising at less than a third of the rate of imports.
The figures marked the last big economic release before the US mid-term elections on Tuesday. They will likely do little to reassure voters about the government's efforts to reduce joblessness, which stood at 9.6pc in September.
Ryan Wang, US economist at HSBC, said: "There were a couple of positive elements, but nothing to change the overall picture that the pace of growth is too slow to make meaningful progress in reducing the resource slack in the economy."
The figures mean that Ben Bernanke, the Fed's chairman, is very likely to relaunch the central bank's money-printing scheme at a key policy meeting starting on Tuesday.
Kathy Bostjancic, director for macro-economic analysis at the Conference Board, representing employers, suggested underlying growth in the economy was lower than the figures implied because a large part of the rise could be attributed to an unintentionally heavy accumulation of inventories.
"Heavy discounting boosted consumer buying but production gains outpaced consumption and investment, so inventories have increased. Reducing those inventories in Q4 will require still more discounting plus some scaling back in production," she said.
She added that the Conference Board now expected growth to recede back below 2pc in the fourth quarter.