Dismal data show US economy headed for lacklustre recovery

Washington: The US economy grew more slowly than initially thought in the third quarter, held back by strong imports and weak investment in nonresidential structures, according to data yesterday that hinted at a lacklustre recovery.

In its second reading of third-quarter gross domestic product, the Commerce Department said the economy grew at a 2.8 per cent annual rate, rather than the 3.5 per cent pace it estimated last month.

It was still the fastest pace since the third quarter of 2007. The return to growth after four straight quarters of decline in output probably ended the most painful US recession in 70 years. The economy contracted at a 0.7 per cent rate in the April-June period.

The growth pace in GDP, which measures total goods and services output within US borders, was a touch below market expectations for a 2.9 per cent rate.

Surging imports, which outpaced the growth in exports, restrained the economic growth rate in the third quarter. Imports jumped 20.8 per cent, the biggest gain since the second quarter of 1985, instead of 16.4 per cent. They knocked 2.53 percentage points off real GDP, the department said.

Another drag on GDP came from the construction of non-residential structures, which dropped 15.1 per cent in the last quarter rather than 9.0 per cent, highlighting the problems in the commercial property market. That shaved just over half a percentage point off GDP.

Businesses reduced accumulated stocks of unsold goods in the last quarter at a slightly faster rate than had been anticipated. Business inventories fell $133.4 billion (Dh490 billion) rather than the $130.8 billion the government estimated in October.

The decline was still a slowdown from the record $160.2 billion plunge in the second quarter. The change in inventories added 0.87 percentage points to real GDP in the third quarter.

Excluding inventories, GDP rose at a 1.9 per cent rate instead of 2.5 per cent. Final sales increased at a 0.7 per cent pace in the second quarter.