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Business

US economy slows in third quarter

The world's largest economy grew at a slower pace as exports and private inventory investment dropped. But crucial consumer spending remained strong, bolstering expansion.

A first estimate of US gross domestic product (GDP) released by the Federal Bureau of Economic Analysis on Thursday saw economic expansion at an annual rate of 1.5 percent in the July-September period.

The reading came in significantly lower than the second quarter's strong 3.9 percent expansion, and was weaker than expected by analysts.

Nariman Behravesh, chief economist at HIS, told the news agency AFP that the "subpar number" should not be mistaken for slower underlying growth. "Much of the weakness stemmed from the onset of a long-awaited correction to private inventories," he added.

However, the 3Q figure shows that economic activity in the world's largest economy remains volatile, with the first quarter mustering only a 0.6 percent rise amid severe winter weather.

Growth slump vs. rate hike

In a positive sign, economic expansion in the quarter was mainly a result of solid consumer spending, which accounts for two thirds of national output.

The data showed that consumer spending rose 3.2 percent between July and September - slightly less than the second quarter's increase. But disposable personal income jumped 3.5 percent, nearly three times the gain in the second quarter.

A downturn in private inventory investment was a large drag on GDP, the Bureau said, noting declines in investment in wholesale trade and in manufacturing.

Trade growth also slowed, with exports rising only 1.9 percent, compared to the 5.1 percent increase in the previous three-month period. Imports rose 1.8 percent, nearly half the prior quarter's increase.

The GDP data came a day after the Federal Reserve signaled it could raise its near-zero interest rate in December if it decides the economy is strong enough to weather the tightening.

Chris Williamson, analyst with research group Markit believes, however, that the slowdown in growth was "flagged well in advance" and therefore unlikely to have a major impact on US Fed policymakers. "Instead, the Fed will be firmly focused on how the fourth quarter is playing out, writing off some of the third-quarter weakness as temporary," he said.

uhe/nz (AFP, Reuters, dpa)

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