Resilience in consumer spending and a rebound in exports offset a decline in business investment in the third quarter for the United States economy resulting in the economy slowing down at a slower pace than markets had been expecting,

This was evident in the data released on Wednesday by the Commerce Department in a report. However analysts are of the opinion that this will likely not deter the US Federal Reserve from further bringing down benchmark interest rates even as threats linger of a halt in the longest expansion period of the economy in history because of uncertainty over trade policy, slowing global growth and the uncertainty of the exit of the United Kingdom from the European Union.

The third quarter marked the second straight quarter of a drop in business investment in et American economy because of waning business confidence due to the Trump administration’s trade war with China. This is the 11^th straight year that the US economy has expanded- the longest in its recorded history.

The government said in its advance estimate of GDP that there was a 1.9 per cent annualized rate growth in gross domestic product in the third quarter even as a steady pace of inventory accumulation was maintained by businesses and a rebound in the housing market following contractions for six straight quarters.

In the April to June quarter, there was a 2 per cent growth in the US economy. According to estimates of economists, the pace of economic growth in the US for a long period of time without being highly inflationary us is between 1.7 per cent and 2 per cent. According to a poll of economists by Reuters, the growth rate of the GDP in the July-September quarter will be at 1.6 per cent.

Growth for the US economy however is still in danger until all tariffs on China are removed even though earlier this month, US president Donald Trump announced a truce in the trade war with China and postponed the imposition of additional tariffs on Chinese imports that were set to be implemented from October. A Trump administration official said on Tuesday the interim trade agreement might not be ready for signing in Chile next month as expected.

Despite slowing down a little, the growth in consumer spending in the US, which accounts for about two thirds of the country’s economic activity, it still clocked a healthy 2.9 per cent growth during the third quarter after having grown at 4.6 per cent in the preceding quarter – the fastest since the fourth quarter of 2017.

The lowest unemployment rate in nearly 50 years in the US is fueling consumer spending. However after a drop in growth of retail sale in the economy in September – a first in seven months, questions about the resilience of consumer spending were raised. There has been a lowering of consumer confidence along with a stalling of wage growth.

During the third quarter, there was a drop of 3 per cent in business investment which is the largest drop in about three and half years. The drop in the preceding quarter was 1 per cent.

(Adapted from Reuetrs.com)

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