Economic growth in the U.S. cooled to a 1.6 percent annual rate in July through September, the slowest since early 2003, as housing slumped and the trade deficit widened.
The government’s first estimate of the quarter’s gross domestic product, the value of all goods and services produced in the U.S., shows growth slowed from a 2.6 percent pace in April through June, the Commerce Department reported today in Washington. A measure of inflation watched by the Fed eased.
Homebuilding declined by the most in 15 years, while the trade deficit widened as an acceleration in personal spending increased demand for foreign-made consumer goods. The fallout for the rest of the economy has been limited, economists said, and recent gains in corporate and consumer spending support the Federal Reserve’s outlook for “moderate” growth.
“Housing-market woes took a lot out of overall growth, but there are increasing signs that the worst may be behind us,” Chris Rupkey, chief financing economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report. “Consumers continue to spend, and really have the wind at their backs now that gasoline prices have fallen.”
From the AP via Yahoo News:
Economic growth slowed to a crawl in the third quarter, advancing at a pace of just 1.6 percent, the worst in more than three years.
The latest snapshot of the economy, released by the Commerce Department on Friday, showed that the slumping housing market figured prominently in the economy’s dramatic loss of momentum. Investment in homebuilding was cut by the biggest amount since early 1991.
The reading on gross domestic product was weaker than the 2.1 percent pace many economists were forecasting.
Businesses, meanwhile, increased spending on equipment and software at a 6.4 percent pace in the third quarter, an improvement from the 1.4 percent rate of decline in the second period.
The economy’s softness in the third quarter stemmed in large part from the cooldown in the once-hot housing market.
Spending on home building dropped at a rate of 17.4 percent in the third quarter. That was the biggest drop since the first quarter of 1991 when such spending was sliced at a 21.7 percent pace.