US economic growth slowed to 1.5 pc over summer, though has strengthened since

Push by businesses to shrink stockpiles hits the economy but is seen as temporary

PUBLISHED : Friday, 30 October, 2015, 1:01am
UPDATED : Friday, 30 October, 2015, 1:01am

The United States economy slowed sharply in the summer, reflecting a cutback in businesses' stockpiling of goods, which offset solid consumer spending. But most economists think growth has been strengthening since the July-September quarter ended.

The Department of Commerce said on Thursday that the economy, as measured by gross domestic product, grew at a tepid annual rate of 1.5 per cent in the quarter, far below the 3.9 per cent rate of the second quarter.

The biggest reason was a push by businesses to shrink unwanted stockpiles, which slashed 1.4 percentage points from quarterly growth but is expected to be only temporary. Encouragingly for the economy, consumer spending remained solid over the summer: It rose at a 3.2 per cent annual rate, down only slightly from the previous quarter.

And most analysts have said they think businesses are stepping up their stockpiling this quarter in response to the continued gains in consumer spending. Many predict that growth in the October-December quarter will rebound to around a 2.5 per cent annual rate.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that excluding the drag from scaled-back inventory rebuilding, Thursday's report was "solid." Noting the consistent strength in consumer spending, Shepherdson said he thinks the current quarter's annual growth rate could reach 3 per cent.

For 2015 the economy is expected to expand around 2.3 per cent, near last year's 2.4 per cent.