Surge in business and consumer spending drove the US economy to an annual growth rate of 3.9% between July and September, but there are still concerns over a slowdown
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| Shopping in New York. The buoyant expansion in the last two quarters has failed to push up average wages and still leaves the US economy operating at 4% below its capacity, according to the Congressional Budget Office. Photograph: Jewel Samad/AFP/Getty Images |
US economic growth was stronger in the third quarter of the
year than first estimated, indicating that the world’s largest economy
bounced back vigorously from a shock contraction at the beginning of
2014.
A surge in business and consumer spending drove the US economy to an annual growth rate of 3.9% between July and September from the previous 3.5% estimate, according to Commerce Department figures.
Officials also revised housebuilding activity higher and said firms built bigger stock inventories, which analysts said was usually a sign of confidence that sales would continue their upward path. GDP was already expanding at a rate of 4.6% in the second quarter.
But the buoyant expansion in the last two quarters has failed to push up average wages and still leaves the US economy operating at 4% below its capacity, according to the Congressional Budget Office. The outlook for the rest of the year and 2015 was also dampened by downward revisions to export growth, which has suffered following a slowdown in China and a decline in global trade.
Signals from the US Federal Reserve that interest rates will start to rise next year have also pushed the value of the dollar higher against most currencies and made it more costly for domestic manufacturers to sell their goods abroad.
Chris Williamson, chief economist at financial data provider Markit, said: “There are signs that the pace of economic growth and job creation could moderate in the final quarter of the year, and possibly to a greater extent than many are currently anticipating.”
Williamson said the US was vulnerable to a bout of severe winter weather, which was chiefly to blame for the dip in output in the first quarter of the year, and could suffer as the eurozone continues to stagnate and global shocks pose a risk to a recovery of trade.
The OECD echoed those concerns over US growth in its latest economic outlook on Tuesday. US growth is projected to reach 2.2% in 2014 and around 3% in 2015 and 2016, according to the latest forecasts from the west’s leading economic thinktank. It said the US and UK would limit the slowdown in global growth to 3.3% in 2014 before better conditions allowed an acceleration to 3.7% in 2015 and 3.9% in 2016.
It said Britain’s economic recovery will continue into 2015 and 2016, driven by consumer spending and business investment.
The Paris-based organisation said high job creation had fuelled UK growth, which it forecasts will come in at 3% this year. The OECD is predicting growth of 2.7% in 2015 and 2.5% in 2016.
Bank of England forecasts also expect the UK to expand in 2015, but governor Mark Carney told MPs on the treasury select committee on Tuesday that global economic conditions had deteriorated in Europe and Japan, which threatens the pace of recovery.
“The geopolitical situation remains difficult and the combination of that suggests a heightened degree of external risk to the United Kingdom,” he said.
The OECD noted that UK export growth has been weak since the recession, pushing the current account deficit to close to 5% of GDP. It said exports could weaken further if eurozone growth comes in below expectations.
Wage growth – which has been unexpectedly weak in 2014 – should start to pick up, it said, adding: “Stimulating retraining and encouraging migration in occupations where shortages arise would reduce labour mismatches and support balanced growth through higher productivity.”
The OECD cautioned however that if productivity does not recover as expected, it could translate into weaker UK growth.
“Robust productivity is an essential condition for strong and sustainable growth, and uncertainty over its recovery is a major risk to the projection. Labour market pressures could disconnect real wage growth from productivity and lead to cost-push inflation.”
A surge in business and consumer spending drove the US economy to an annual growth rate of 3.9% between July and September from the previous 3.5% estimate, according to Commerce Department figures.
Officials also revised housebuilding activity higher and said firms built bigger stock inventories, which analysts said was usually a sign of confidence that sales would continue their upward path. GDP was already expanding at a rate of 4.6% in the second quarter.
But the buoyant expansion in the last two quarters has failed to push up average wages and still leaves the US economy operating at 4% below its capacity, according to the Congressional Budget Office. The outlook for the rest of the year and 2015 was also dampened by downward revisions to export growth, which has suffered following a slowdown in China and a decline in global trade.
Signals from the US Federal Reserve that interest rates will start to rise next year have also pushed the value of the dollar higher against most currencies and made it more costly for domestic manufacturers to sell their goods abroad.
Chris Williamson, chief economist at financial data provider Markit, said: “There are signs that the pace of economic growth and job creation could moderate in the final quarter of the year, and possibly to a greater extent than many are currently anticipating.”
Williamson said the US was vulnerable to a bout of severe winter weather, which was chiefly to blame for the dip in output in the first quarter of the year, and could suffer as the eurozone continues to stagnate and global shocks pose a risk to a recovery of trade.
The OECD echoed those concerns over US growth in its latest economic outlook on Tuesday. US growth is projected to reach 2.2% in 2014 and around 3% in 2015 and 2016, according to the latest forecasts from the west’s leading economic thinktank. It said the US and UK would limit the slowdown in global growth to 3.3% in 2014 before better conditions allowed an acceleration to 3.7% in 2015 and 3.9% in 2016.
It said Britain’s economic recovery will continue into 2015 and 2016, driven by consumer spending and business investment.
The Paris-based organisation said high job creation had fuelled UK growth, which it forecasts will come in at 3% this year. The OECD is predicting growth of 2.7% in 2015 and 2.5% in 2016.
Bank of England forecasts also expect the UK to expand in 2015, but governor Mark Carney told MPs on the treasury select committee on Tuesday that global economic conditions had deteriorated in Europe and Japan, which threatens the pace of recovery.
“The geopolitical situation remains difficult and the combination of that suggests a heightened degree of external risk to the United Kingdom,” he said.
The OECD noted that UK export growth has been weak since the recession, pushing the current account deficit to close to 5% of GDP. It said exports could weaken further if eurozone growth comes in below expectations.
Wage growth – which has been unexpectedly weak in 2014 – should start to pick up, it said, adding: “Stimulating retraining and encouraging migration in occupations where shortages arise would reduce labour mismatches and support balanced growth through higher productivity.”
The OECD cautioned however that if productivity does not recover as expected, it could translate into weaker UK growth.
“Robust productivity is an essential condition for strong and sustainable growth, and uncertainty over its recovery is a major risk to the projection. Labour market pressures could disconnect real wage growth from productivity and lead to cost-push inflation.”
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