U.S. Third-quarter GDP Growth Slows To 1.5%

The U.S. economy slowed to annual growth rate of 1.5% in the third quarter from 3.9% in the spring, mostly owing to a smaller buildup in warehouse inventories. Yet the main engine of U.S. economic growth, consumer spending, rose a much healthier 3.2% after an even larger gain in the second quarter. The steady pace of spending is likely to extend into the fourth quarter, helped by cheaper gas prices, rising inflation-adjusted incomes and a big burst in hiring over the past several years. Business investment in equipment, meanwhile, rose 5.3% in the third quarter, more than offsetting a 4% drop in spending on structures such as oil platforms or commercial buldings. Outlays on home construction climbed 6.1%. Yet strength in those areas was unable to fully offset weak investment in inventories. The value of warehouse merchandise rose by $56.8 billion in the third quarter, a dramatic comedown from gains of $113.5 billion and $112.8 billion in the prior two quarters. Trade was a wash. Exports rose 1.9%, with imports up 1.8%. Inflation as measured by the PCE index rose at a 1.2% annual pace in the third quarter, or 1.3% minus food and energy.

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