The US economy grew at a slightly slower pace than first thought in the third quarter of 2015, continuing a sluggish recovery trend started after the last recession.
The Commerce Department announced Tuesday that gross domestic product (GDP) for the third quarter of 2015 grew at an annual rate of 2%, down from a previous estimate of 2.1%. This was the department’s third and final estimate of the quarter’s GDP.
The latest GDP measure, the broadest indicator of a nation’s economic health, marks yet another quarter of low growth and is a marked slowdown from the 3.9% growth rate reported between July and September.
Federal Reserve officials are not expecting much improvement in 2016, estimating growth of 2.1% to 2.4%.
Consumer spending, which accounts for more than two-thirds of US economic activity, was one of the largest drivers of growth, growing at a 3% annual rate. Spending on plants and equipment, state and local government spending, residential investments, and exports all contributed to the growth.
The deceleration in GDP came mainly as companies spent less stockpiling their inventories.
Corporate profits after tax fell at a 1.7% rate in the third quarter and profits, undercut by the dollar’s strength and lower oil prices, were down 8.2% from a year ago.
The latest GDP figures come after the Fed voted to raise interest rates for the first time in close to a decade. While economic growth has remained sluggish, the US has now added new jobs every month since October 2010 and has added an average of 237,000 jobs a month over the past 12 months.
At a news conference announcing the rate hike, Fed chair Janet Yellen said: “This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression.”
She said the economy “has come a long way”, though normalization “is likely to proceed gradually”.
“The economy should continue to expand at an above-trend pace through next year. With solid job gains, accelerating wage growth, lower energy prices boosting after-inflation incomes, and low interest rates, consumer spending will continue to lead overall economic growth,” said Gus Faucher, senior economist at PNC. “The more extended drag will come from trade, given soft global growth and the strong US dollar that makes exports from the US more expensive and imports to the US less expensive.”
