Inventories rise as GDP growth tops forecasts

Print
Font Size:
Default font size
Larger font size

Posted: Friday, November 8, 2013 12:00 am

Bolstered by inventory investments and a narrowing trade deficit, the U.S. economy grew more quickly than had been expected in the third quarter, but economists warned that the gains could be fleeting.

At an annual rate of 2.8 percent, the pace of growth over July, August and September was the fastest since the third quarter of 2012, the Commerce Department said Thursday. It was also well above the 2 percent level economists had predicted.

Still, some experts warned that the details of the report did not paint quite as rosy a picture as the headline number would suggest.

“I was a little surprised by the overall number, which was higher than expected, but most of that is traceable to the gain in inventories,” said Douglas P. Handler, chief U.S. economist at IHS. “We are still looking at some serious issues in the fourth quarter.”

For example, consumer spending in the third quarter increased by 1.5 percent, well below the 2.3 percent pace of the first quarter and the slowest advance since the second quarter of 2011.

“There’s no reason to think there will be a takeoff,” said Guy Berger, U.S. economist at RBS Securities.

Berger added that, when inventories rise quickly, it tends to pull growth forward from future quarters, increasing the chances that the final quarter of 2013 could be disappointing. The inventory gain added nearly 1 percentage point to growth in the third quarter and accounted for much of the upside surprise.

Indeed, even as Wall Street digested the report for the third quarter, which was delayed by last month’s partial shutdown of the federal government, worries about the fourth quarter were mounting.

Many economists estimate that the shutdown, which began on Oct. 1 and lasted until Oct. 17, will reduce growth by between a quarter and half a percentage point in the final three months of the year.

What’s more, reduced government spending continues to weigh on the economy overall, as across-the-board spending cuts imposed by Congress this year begin to bite. In the third quarter, federal spending fell by 1.7 percent, slightly faster than the decline in the second quarter.

One notable area of strength in the third quarter was the housing sector, which has been one of the brightest spots in an otherwise fitful recovery. Residential housing investment rose by 14.6 percent, a slight pickup from the already robust gains in the first half of the year.

Copyright ©2014 Omaha World-Herald. All rights reserved. This material may not be published, broadcast, rewritten, displayed or redistributed for any purpose without permission from the Omaha World-Herald. To purchase rights to republish this article, please contact The World-Herald Store.


loading...

SPOTLIGHT »

Inside Business
To submit an announcement for "Inside Business", click here. For questions call (402) 444-1371 or e-mail announcements@owh.com.

World-Herald Alerts

Want to get World-Herald stories sent directly to your home or work computer? Sign up for Omaha.com's News Alerts and you will receive e-mails with the day's top stories.