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United States: Economic growth slumps in Q3 although consumer spending remains strong

October 29, 2015

In the third quarter, GDP expanded at a seasonally adjusted annualized rate (SAAR) of 1.5%, according to an advance estimate released by the Bureau of Economic Analysis (BEA) on 29 October. The print marked a significant deceleration over the 3.9% growth recorded in the second quarter and slightly undershot market expectations of a 1.7% increase. The deceleration reflects a weakening in fixed investment, government spending, and exports, although private consumption grew at a healthy pace. A slowdown in inventory accumulation also dragged on growth.

Q3’s result was the weakest since Q1 2014 and comes just one day after the Federal Reserve hinted that it was considering an interest rate hike in December amid perceived improvements in the economic environment. Further data releases, particularly those related to the job market, will be crucial when the Fed makes its next decision.

On the domestic side of the economy, private consumption expanded 3.2% in Q3. This was below 3.6% tallied in Q2 but suggests that consumer spending, the motor of the economy, is being supported by low energy prices and labor market gains. In contrast, non-residential fixed investment slumped from a 4.1% increase in Q2 to a 2.1% rise in Q3. Residential fixed investment slowed from a 9.4% expansion in Q2 to an increase of 6.1% in Q3. Moreover, government spending increased just 1.7% after having expanded 2.6% in the previous quarter.

Exports increased a meagre 1.9% in the second quarter as global demand stutters and the U.S. dollar remains strong (Q2: 5.1% quarter-on-quater SAAR) while imports increased 1.8% (Q1: 3.0% qoq SAAR). Consequently, the external sector’s net contribution to overall growth moderated from 0.2 percentage points in the second quarter to a flat contribution in Q3.

The Federal Reserve expects economic growth to range between 1.9% and 2.5% in 2015 and between 2.1% and 2.8% in 2016. FocusEconomics Consensus Forecast panelists expect GDP to expand 2.5% in 2015, which is unchanged from last month’s forecast. For 2016, the panel expects the economy to expand 2.6%, which is down 0.1 percentage points from last month’s estimate.


Author:, Economist

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USA GDP Q3 2015

Note: Quarter-on-quarter annualized changes and annual variation of seasonally adjusted GDP in %.
Source: Bureau of Economic Analysis and FocusEconomics Consensus Forecast.


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