A slumping housing sector helped slow US economic growth in the third quarter to its weakest pace in more than three years, the Commerce Department reported today.
GDP expanded at a 1.6 per cent annual rate during the third quarter, down from 2.6 per cent in the second quarter, for the slowest advance since 1.2 per cent in the first quarter of 2003.
Third-quarter GDP growth was well below Wall Street analysts' forecasts for a 2.2 per cent rate of growth and reflected a range of influences that combined to slow the economy.
Most striking was a 17.4 per cent annual rate of contraction in spending on new housing - the biggest decline in 15 years since a 21.7 per cent drop in the first quarter of 1991.
In addition, business spending on inventories increased only at a $50.7 billion rate, slowing from $53.7 billion in the second quarter, and the volume of imported goods accelerated sharply to a 7.8 per cent annual rate of increase in the third quarter, more than three times the second quarter's 1.4 per cent increase.
The drag on growth from a rapidly softening housing sector was expected, since other reports have shown prices are weakening for both new and existing homes and builders are offering incentives to try to reduce their inventories of unsold homes.
By contrast, the GDP report showed that business investment remained healthy and consumers picked up their spending pace, giving credence to forecasts that the economy retains enough vigour to keep growing at least at a moderate rate.
Consumer spending, which accounts for roughly two-thirds of national economic activity, increased at a 3.1 per cent rate, up from 2.6 per cent in the second quarter.