economy

By Ylan Q. Mui
Friday, December 6, 2013

The U.S. economy grew faster than estimated during the third quarter, according to government data released Thursday, but analysts say that pace is unlikely to be sustained through the end of the year.

The nation’s gross domestic product increased at a 3.6 percent annual rate in the three months that ended in September, nearly a percentage point more than previously thought. The strong reading was boosted, however, by a buildup in business inventory that economists say actually reflects slack consumer demand.

The recovery fundamentally remains on the same slow and steady track that it has followed since the recession ended in 2009, economists said. Many expect growth in the fourth quarter to fall to less than 2 percent.

“It’s generally good news, but nothing that would cause us to alter our baseline forecast all that much,” said Mike Schenk, vice president of economics and statistics for the Credit Union National Association.

The predictions for job growth are more optimistic. The Labor Department is slated to release its closely watched monthly tally of job creation and unemployment Friday. Economists expect it will show that the country added 185,000 jobs in November while the jobless rate ticked down to 7.2 percent.

The key question is whether those expected improvements will be enough to convince the Federal Reserve that the economy no longer needs its support. The central bank has been pumping $85 billion a month into the recovery, and investors have been watching closely for signs that it will begin to reduce its stimulus. Fed officials are slated to meet in Washington later this month, and Friday’s data will likely factor heavily into their decision.

Strong data from the labor market would signal that the private sector is healing despite headwinds from Washington. Government spending cuts and higher taxes depressed GDP growth by as much as 1.5 percentage points, analysts estimate.

To read entire story, click here.