US growth offsets weak spending
US economic growth accelerated in the third quarter as businesses restocked shelves but the slowest expansion in consumer spending in two years pointed to an underlying weakness.
Gross domestic product expanded at a 2.8pc annual rate, the quickest pace since Q3 2012, the Commerce Department said. It was a pick-up from a 2.5pc clip in the second quarter and beat economists' expectations for 2pc growth.
Details of the first estimate of third-quarter GDP were generally weak, with inventories contributing 0.83 percentage point to GDP growth. Excluding inventories, the economy grew at a 2pc rate after expanding 2.1pc in the second quarter.
Business spending growth also slowed sharply, lending the report a weak tone and validating the US Federal Reserve's decision to stick to its $85bn (€63bn) bond-buying scheme.
With near-term growth prospects not that bright, a reduction in the purchases, which aim to keep interest rates low, is not expected this year.
"The Fed knows the calculation behind GDP and they will see the moderating trend, which is weaker than the headline suggests," said Sam Bullard, economist at Wells Fargo Securities.
Consumer spending, which accounts for more than two-thirds of US economic activity, expanded 1.5pc, the slowest pace since the Q2 in 2011.
Some of the slowdown in consumption reflected weak demand for utilities because of unseasonably cool weather in the summer. (Reuters)