Rising Inventories Upgrade US Q3 GDP

The U.S. economy grew at a healthier clip in the third quarter than initially thought, but strong inventory accumulation by businesses could temper expectations of an acceleration in growth in the final three months of the year.

The Commerce Department on Tuesday said the nation’s gross domestic product grew at a 2.1 percent annual pace, not the 1.5 percent rate it reported last month. It said efforts by businesses to reduce an inventory bloat had not been as aggressive as previously believed.

Still, the pace of economic growth, which was also boosted by upward revisions to business spending on equipment, suggests a resilience that could help give the Federal Reserve confidence to raise interest rates next month. While consumer spending was revised down a bit, its pace remained brisk.

“This is a sturdy second GDP print for the third quarter when looking past the inventory swings,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto. “Importantly, domestic demand in the U.S. economy remains very solid, something that will surely give comfort to the Fed as it ponders its next move.”

When measured from the income side, the economy grew at a sturdy 3.1 percent clip, the fastest in a year and an acceleration from the second quarter’s 2.2 percent pace.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza