Last updated: December 22, 2011 3:20 pm
By Johanna Kassel in New York
The US economy grew at a slower rate than initially thought in the third quarter after personal spending was less than expected, according to the final gross domestic product reading for the period.
The economy expanded at a rate of 1.8 per cent, the US Department of Commerce said on Thursday. The economy grew by 1.3 per cent in the second quarter.
The downward revision was mainly attributed to lower personal consumption.
Personal consumption growth was revised down by 0.6 percentage points, falling to 1.7 per cent from a revised reading of 2.3 per cent. Personal consumption had grown by 0.7 per cent in the second quarter. Durable goods spending increased 5.7 per cent, which includes household appliances, computers and motor vehicles.
Consumer spending has been on the rise in the second half of the year and has been viewed as one of the key supports to the lagging economic recovery.
“While the downward revision to the consumption should help keep the consumer’s woes in mind, we are more concerned that this comparatively slow increase came in a quarter when the US consumer cut their savings rate from 5 per cent to 3.3 per cent,” said David Semmens, chief US economist at Standard Chartered.
“We still maintain that the consumer will stay supportive for growth, especially as hiring improves albeit modestly in 2012, but the continuation of the deleveraging process should keep any optimism in check.”
Some of this weakness may be recovered in the fourth quarter when consumer spending is usually strongest with support from holiday shopping.
A bright spot in the report was the strengthening of inventories, with US companies replenishing depleted stockpiles. Private inventories decreased by only $2bn in the third quarter after being revised significantly from an earlier reading of a decrease of $8.5bn.
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