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Consumer spending pumps up US economy to 2% in Q3

Dec 28, 2015 08:30 AM EST

The World's largest economy grew two percent in the third quarter. The rising consumer spending propelled the economy to grow while businesses were struggling to sustain in the sluggish growth. The surging US dollar also impacted foreign trade in a more negative way.

The US Commerce Department released latest data about the economy growth for third quarter ending September 2015. In addition to consumer buying support, the major factors that supported the US economy were the government outlay and business investment.

The average forecast of 76 economists in a survey by Bloomberg was 1.9 percent when compared with previously reported 2.1 percent pace. The gain in gross domestic product (GDP) was two percent in third quarter as against the 3.9 percent growth in the second quarter.

Though there was a marginal reduction in growth, the household buying kept up the demand during the third quarter.

The US economy witnessed a rebound in April, May and June. But the 2.3 percent annualized rate, adjusted for inflation made it below the forecast. The stock markets were moving in restricted range as investors are not impressed. Economists term the third quarter growth rate was ok, if not encouraging.

The New York Times reports that after a dismal beginning of 2015, the US economy picked up encouragingly in the second quarter. It may continue its growth rate next year as well. The downward revisions of growth for the past three years underscored the challenges, which are still lying ahead of the US economy. 

The global concerns are weighing a lot on US exports and impacted the GDP during the third quarter. The GDP growth was two percent for the third quarter below the forecast of 2.1 percent. However, it surpassed the Reuters' forecast of 1.9 percent. 

According to a report by Fox Business, the rise in US dollar was eating into export revenues of the US. The higher dollar value made US goods expensive for emerging economies. The export demand eased as sluggish economy situation from Europe to China and South America to Africa impacted the foreign trade. 

Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, North Carolina, said: "Consumption is a big piece of it and it's chugging along. It's hard to be really enthusiastic about the outlook for trade and business investment amid weak growth overseas."

The forecasts of economists about the US GDP were ranging from 1.5 percent to 2.1 percent. The US economy grew at 2.3 percent during the first half of 2015 as against its 2.4 percent growth for 2014. 
The marginal drop in third quarter growth indicated an increase in inventories.

Consumer spending saw little changed from a prior report. The drop in outlays was offset by gains in non-profit agencies serving households.

The surging US dollar and sluggish global economy growth have been impacting US exports. The foreign trade eased 0.3 percent. Inventories subtracted 0.7 percent from growth compared with the previous forecast of 0.6 percent. The overseas demand was weaker than anticipated.

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