The US economy expanded at a faster pace in the third quarter than was thought with GDP growth revised up from an annualised 2% to 2.7%.
But looking through the positives, the breakdown of the changes suggests that the fourth quarter will be significantly weaker.
‘Inventories are now estimated to have added 0.8% to overall GDP growth, whereas the first estimate indicated that they subtracted 0.1%,’ said Paul Ashworth, chief US economist at Capital Economics. ‘The bigger the build-up in the third quarter, the more likely we are to see a run down in the fourth.’
Added to this, consumption growth was revised down from 2% to 1.4%, but despite this, the personal saving rate also fell modestly, revised to 3.6% from 3.7%.
Estimates for business investment has also been pruned back from a 1.3% rise to a 2.2% contraction, while government spending ballooned by 3.5%.
‘A slowing trend already looks likely in the fourth quarter due to storm disruptions and because business confidence has sunk to its lowest for a year, hit in particular by uncertainty caused by the looming fiscal cliff and ongoing worries about the eurozone crisis,’ said Chris Williamson, chief economist at Markit.
‘Manufacturing also continues to be affected by weak export sales, with the underlying trend in output estimated to have been flat in October after allowing for a 0.9% drop in production resulting from Hurricane Sandy. Durable goods orders were likewise unchanged during the month.
‘The official data available so far therefore suggest that goods-producers are unlikely to contribute to GDP growth in the final three months of the year, and that the storms will have depressed the growth rate in the absence of a rapid rebound in orders and production.
‘However, a pick-up in the flash manufacturing PMI to a five month high in November provides some hope that the worst is at least over for the sector, even If the pace of growth remained stubbornly weak.’
Capital is now projecting fourth quarter GDP growth to come in at just under 2%.