Nothing about the world’s biggest economy is clear at present. Will the Federal Reserve raise interest rates before Christmas? Nobody is really sure. Is the economy still recovering well or is it on the cusp of a fresh downturn? The jury’s out on that and the latest data doesn’t help much either.
On the face of it, the growth figures were poor. In the year to the third quarter of 2015, the world’s biggest economy grew at an annual rate of 1.5%, far weaker than the 3.9% posted in the second quarter. It’s worth noting that the US publishes its growth rate in a different way to the UK and the euzozone: 1.5% equates to a quarterly growth rate of about 0.4%.
The breakdown of the US data means that the underlying picture is not quite as soft as the headline number suggests. Firms met quite a lot of demand for their goods from inventories built up in earlier quarters, and this de-stocking shaved almost 1.5 percentage points off the annualised growth rate.
What’s more, consumers are spending the windfall gains from lower energy prices. Consumption grew at an annual rate of 3.2%, only slightly down on the 3.6% notched up in the second quarter.
None of which means the Fed is certain to pull the interest-rate trigger in mid-December. Forward-looking surveys have been signalling a slowdown, the strong dollar is hitting corporate profits, business investment is growing at only just over 2%, and inflationary pressure eased in the third quarter.
The US central bank would have known what the growth figures were before it met this week. It clearly wants to leave all options open, not least even though a move before the end of the year would probably require a big jump in non-farm payrolls – the key measure of the health of the labour market – in the next couple of months.
