WASHINGTON – The U.S. economy grew at an annual rate of 3.1 percent over the summer as exports increased, consumers spent more and state and local governments added to growth for the first time in three years. But the economy is likely slowing in the current quarter.
The Commerce Department’s third and final estimate Thursday of growth for the July-September quarter was revised up from its previous estimate of a 2.7 percent annual growth rate.
Growth in the third quarter was more than twice the 1.3 percent growth rate in the April-June quarter. But disruptions from Superstorm Sandy and uncertainty weighing on consumers and businesses from the fiscal cliff are likely holding back growth in the October-December quarter.
Many analysts predict an annual growth rate of just 1.5 percent for this quarter.
Robert Kavcic, an economist at BMO Capital Markets, said the upward revision to third-quarter growth didn’t change his view that the economy is slowing in the current quarter to an annual growth rate below 2 percent. Kavcic said a temporary jump in defense spending and business stockpiling in the July-September period is likely being reversed this quarter.
And many economists aren’t expecting much improvement in the January-March quarter. The latest forecast from 48 economists for the National Association of Business Economics is for an annual growth rate of just 1.8 percent in the first quarter of 2013. Growth at that level is considered too weak to significantly lower the unemployment rate, which was 7.7 percent in November.
But if Congress and the White House reach agreement to avoid the fiscal cliff, growth could accelerate next year, many economists, including Federal Reserve Chairman Ben Bernanke, have said. The Fed last week said it plans to keep a key interest rate at a record low as long as unemployment remains above 6.5 percent. And it forecast that unemployment would stay that high until late 2015.
The government’s final estimate of a 3.1 percent growth rate for gross domestic product last quarter is a sharp improvement over its initial estimate of a 2 percent rate – a figure that it later revised up to 2.7 percent based on a buildup in business stockpiles.
At a glanceSeveral other economic reports were released Thursday. They include:
Home sales: U.S. sales of previously occupied homes jumped to their highest level in three years last month, bolstered by steady job gains and record-low mortgage rates. The National Association of Realtors said sales rose 5.9 percent to a seasonally adjusted annual rate of 5.04 million in November. That’s up from 4.76 million in October.
Jobless claims: The number of Americans applying for unemployment benefits rose last week by 17,000, reversing four weeks of declines. But the number of people seeking aid is consistent with a job market that continues to grow modestly. Unemployment claims rose the week of Dec. 15 to a seasonally adjusted 361,000 from a revised 344,000 the week before. The less-volatile four-week moving average fell 13,750 to 367,750, lowest since late October.
Leading indicators: A measure of the U.S. economy designed to signal future activity fell in November, suggesting that growth could remain weak in the early part of next year. The Conference Board said its index of leading indicators dropped 0.2 percent in November, compared with October, when the index had risen 0.3 percent. It was the first decline in the index since a 0.4 percent fall in August.