October 27, 2012 - 10:46 AMT
PanARMENIAN.Net - The U.S. economy sped up in the third quarter as consumers and the federal government boosted spending and home construction accelerated, MarketWatch reports.
Yet business investment fell by the largest amount in three years, signaling that a political stalemate in Washington is acting as a drag on the economy. Business leaders are increasingly worried that sales and investment could plummet unless Washington forestalls big spending cuts and tax increases set to take effect at the start of 2013.
In the July-to-September period, gross domestic product grew at a 2% clip, up from 1.3% in the second quarter, the Commerce Department said Friday. The rate of growth also matched the economy’s performance in the first three months of the year.
GDP, the broadest measure of an economy’s health, represents the value of all goods and services produced in the U.S. The latest data show an economy still recovering three years after the deepest downturn since the Great Depression, though at a growth rate well below its potential.
“By any objective expectation, the most positive spin that can be put on today’s report is that the economy may have improved modestly, but continues to struggle with lackluster growth in a disappointing expansion,” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors.
With the presidential election 11 days away, Republicans argue President Barack Obama’s policies have restrained the recovery. The White House insists the economy is on the mend and is urging voters to stick with the president. The latest GDP report probably won’t be expected to persuade many voters in a tight race that could sway either way.
Growth accelerated over the summer after dipping in the spring mainly because of consumers, whose spending accounts for up to 70% of U.S. economic activity.
Americans increased spending by 2% in the third quarter, compared with a 1.5% rise in the second quarter.
Another key measure of spending, called final sales to domestic buyers, rose a slightly faster 2.3%. That figure, which is closely followed by economists, excludes unsold inventories. It gives a better idea of how much overall demand exists in the U.S.
Yet consumers had to dip into savings in the third quarter to finance their purchases because wages are not increasing fast enough.