U.S. Economy Grew at 2.7 Percent Rate in Summer

Economy growthBy MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) - The U.S. economy grew at a 2.7 percent annual rate from July through September, much faster than first thought. The strength is expected to fade in the final months of the year because of uncertainty about looming tax increases and government spending cuts.

The Commerce Department said Thursday that growth in the third quarter was significantly better than the 2 percent rate estimated a month ago. And it was more than twice the 1.3 percent rate reported for the April-June quarter.

The main reason for the upward revision to the gross domestic product was businesses restocked at a faster pace than previously estimated. That offset weaker consumer spending growth.

GDP measures the nation's total output of goods and services - from restaurant meals and haircuts to airplanes, appliances and highways.

Most economists say economic growth is slowing to below 2 percent in the current October-December quarter. That's generally considered too weak to rapidly lower the unemployment rate.

Paul Ashworth, chief U.S. economist at Capital Economics, said companies are likely restocking more slowly now. Businesses typically cut back on restocking when they think consumers will spend less. Consumer spending drives roughly 70 percent of economic activity.

Economists cite two reasons for the anticipated weakness in consumer and business spending.

Superstorm Sandy halted business activity along the East Coast in late October and November. And spending may weaken in the final weeks of the year, if lawmakers and Obama fail to reach a deal to avoid the "fiscal cliff." That's the name for sharp tax increases and spending cuts that would occur in January without a deal.

Companies are "likely thinning inventories just in case Congress fails to do its job, which is always a possibility," said Joel Naroff, chief economist at Naroff Economic Advisors.

A separate report Thursday showed the negative impact of Superstorm Sandy is starting to fade. The number of Americans seeking unemployment benefits fell 23,000 to a seasonally adjusted 393,000 last week, the Labor Department said. It was the second straight drop after Superstorm Sandy had driven applications to 451,000 three weeks ago.

Still, consumers and businesses appeared to be more cautious over the summer, according to the GDP report.

Consumer spending grew at a weaker 1.4 percent rate in the third quarter, down from the 2 percent rate estimated a month ago and nearly in line with the 1.5 percent rate in the second quarter.

Businesses spending on equipment and software fell at an annual rate of 2.7 percent in the third quarter, the first decline since the depths of the recession in April-June 2009.

The report showed continued strength in homebuilding, which rose at an annual rate of 14.2 percent. And government spending expanded at an annual rate 3.5 percent, marking its first positive contribution to overall economic growth in two years. The increase was driven by a big jump in defense spending.

While economists predict slower growth in the final months of the year, several reports suggest economic activity picked up in October and early November. And if Congress and the White House reach agreement and avoid the fiscal cliff, economic growth could accelerate next year, many economists say.

A Federal Reserve survey released Tuesday showed improved consumer spending and steady home sales helped lift growth from October through early November in most parts of the United States. The one exception was the Northeast, where the storm led to widespread disruptions.

The Labor Department said employers added 171,000 jobs last month and hiring in September and August was stronger than previously thought.

Rising home values, more hiring and lower gas prices pushed consumer confidence in November to the highest level in nearly five years, according to the Conference Board.

A better mood among consumers appears to have encouraged businesses to invest more in October after pulling back over the summer.

There are already signs that consumer optimism is leading to more spending. A record number of Americans visited stores and shopping websites over the four-day Thanksgiving weekend, according to a survey by the National Retail Federation.

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Joe c'mon over to the Mickey D's blog, Evan is over attempting stand-up again.

November 30 2012 at 4:20 PM Report abuse -1 rate up rate down Reply
1 reply to barikffaarik's comment

A couple of losers you two are, mastvrbating each other all day long.

December 01 2012 at 2:58 PM Report abuse -1 rate up rate down Reply
3 replies to chris1011's comment

This BS meetings on capitol hill aren't going to amount to sh*t, Obama is hoping that Boehner turns down every Trillion dollar spending deal, and rightly so, so he can blame the republicans for the automatic cuts to defense and payroll taxes etc. We are going off the cliff with no doubt, furthering Obama's agenda for the USA. Bankrupt the middle class, were his attentions all along.

November 30 2012 at 4:15 PM Report abuse -3 rate up rate down Reply
1 reply to barikffaarik's comment

Lib smoke and mirrors. That's all we get.

November 30 2012 at 4:19 PM Report abuse -4 rate up rate down Reply

Here's something to think about. The total estimated amount of gold that has been produced in the world is approx 5.8 billion oz or 9.5 trillion dollars worth. All the gold in the world would only cover two thirds of US debt.

November 30 2012 at 2:30 PM Report abuse -3 rate up rate down Reply

One reason that "OUR" economy is growing is that many, many, many people in the USA are getting on-board to buy made in USA food and products "ONLY"!! "We" have been doing this for two years and will continue to control our spending habits in this manner in the future! We buy all we can at local retail outlets, and the rest we purchase on-line (google search made in USA)!! At these sites we are able to buy 95% of the rest of the products we want and need!! Please join us in our efforts to help our economy grow!! TOGETHER WE CAN "BUY" OUR COUNTRY BACK!!!!!

November 30 2012 at 5:27 AM Report abuse +2 rate up rate down Reply
1 reply to Retool's comment

What about all the people that could care less ? Don't forget some Walmartians love Walmart and wouldn't shop anywhere else, some not by choice either. Most shop there because they are on a tight budget because of the poor economy. Don't forget 23 million + are without a job, and 49 million on food stamps, most people can't afford to buy American made only products. They are expensive. Don't worry Obama's buddy Ben is going to flood the economy with funny money and Obama is going to raise everyones taxes so he can squander more of it .

November 30 2012 at 8:32 AM Report abuse -3 rate up rate down Reply

Get rid of ALL republicans and the economy will grow faster!

November 30 2012 at 2:19 AM Report abuse +6 rate up rate down Reply
2 replies to Frankie's comment

if that happens .. there will be no money .. and people like you will have a real taste of reality .. and need to be self sufficient .... dont think you could handle that

Always remember .. Republicans = Tax payer .. he;s your bread and butter

November 30 2012 at 9:11 AM Report abuse -3 rate up rate down Reply

By 2016 America will be begging for a Republican president. You can't spend your way out ot debt......idiot.

November 30 2012 at 11:43 AM Report abuse -4 rate up rate down Reply

Bernanke has DOUBLED the money supply in the past 4 years. In the not-so-long-run our Dollars will buy 1/2 of what they did in 2007 (which BTW was 5% of whatthey bought when the Federal Reserve began in 1913).

A 3% gain on a 50% reduction in buying power is not cause for champaigne. It's PITCHFORK time!

November 30 2012 at 2:11 AM Report abuse +1 rate up rate down Reply
1 reply to rickpetersonms's comment

Even if you stash your money in a mattress, you lose.

November 30 2012 at 12:07 PM Report abuse -1 rate up rate down Reply

Economy Grew at 2.7 Percent Rate in Summer in China, but the U.S. still has recorded breaking unemployment and recorded breaking welfare.... If you are any color other then white, if you make less then 250,000 thousand a year, you can get welfare... Please send picture of your 30 kids or a photo of your guns and will send send you welfare, no Social security card needed

November 29 2012 at 11:57 PM Report abuse -3 rate up rate down Reply

The dopey Obamite is posting in all his dopey screen names today.

November 29 2012 at 11:08 PM Report abuse -6 rate up rate down Reply
2 replies to democrackso's comment

For that he gives you 4 thumbs down all by himself.

November 30 2012 at 12:08 PM Report abuse -4 rate up rate down Reply

Evan is on a roll. Obama's bank roll. Gimme gimme gimme

November 30 2012 at 3:10 PM Report abuse -1 rate up rate down Reply

re electing obama was great. the economy is turning around. you can feel this, people are happy. our great leader will be leading us to the road of high employment jobs, more money to spend, more union jobs walmart , good times are here again. take your credit cards out spend, this economy is booming. jobs are going way up thank goodness our great leader is back into take us there., california will tax more but appreciate that we can afford higher cost electric gas food rent etc. the massia is here

November 29 2012 at 11:05 PM Report abuse +1 rate up rate down Reply
2 replies to radareastbay's comment

Obamas a castastrophe

November 29 2012 at 11:06 PM Report abuse -4 rate up rate down Reply

Is that you dumb ole Evan. Nobody else is quite so delusional.

November 29 2012 at 11:06 PM Report abuse -2 rate up rate down Reply
5 replies to freethedems2012's comment

The Republican rich man Economy Sucks !

November 29 2012 at 10:53 PM Report abuse +3 rate up rate down Reply
2 replies to ovstampco's comment

Obama's economy will be much, much worse even for you on welfare

November 29 2012 at 10:58 PM Report abuse -3 rate up rate down Reply

Obamas rich and lives like a king off the tax payers dime

November 29 2012 at 10:59 PM Report abuse -3 rate up rate down Reply