WASHINGTON, Dec 22 – The US economy limped forward at a 2.2 percent pace in the third quarter, according to government figures Tuesday that showed a downward revision of gross domestic product (GDP).
The downward revision from last month\’s estimate of 2.8 percent came primarily from a weaker contribution from business investment, as well as slightly slower consumer spending growth.
The report nonetheless confirms that the world\’s biggest economy swung back to growth in the July-September period after four quarters of contraction in the worst recession in decades.
The Commerce Department revision indicates the economy\’s momentum in the third quarter was weaker than anticipated, suggesting that the recovery from recession may be tepid.
"The recovery is underway, but this does raise concerns about its strength and the prospects for a turnaround in the labor market," said Augustine Faucher at Moody\’s Economy.com.
Scott Brown, chief economist at Raymond James & Associates, said the report was "a bit disappointing" and suggests "that underlying domestic demand is pretty soft."
Brown said he expects a jump in growth to at least 4.0 percent in the current fourth quarter, but says much of that will come from restocking of business inventories drawn down in the recession.
Looking at 2010, Brown said the economy may grow at around 3.0 percent "which is good by historical standard but not enough to bring the unemployment rate down substantially."
"It\’s going to take a long time before we\’re firing on all cylinders," he added.
The third quarter GDP report showed business investment grew at a 5.0 percent pace, revised down from an earlier estimate of 8.4 percent. Consumer spending, which accounts for the lion\’s share of economic activity was revised to show growth of 2.8 percent instead of 2.9 percent.
The report showed manufacturing helping lift the economy, especially in the auto sector where the "cash for clunkers" incentives program boosted sales into August.
Motor vehicle output accounted for 1.45 percentage points of GDP in the quarter.
Federal government expenditures were up 8.0 percent in the quarter but state and local government spending fell 0.6 percent.
The GDP report was the final revision after two earlier estimates, the first of which showed a surprising 3.5 percent pace of growth. This was cut twice based on more complete data for the end of the quarter.
Robert Brusca at FAO Economics said the report confirms the economy is on the mend: "this setback is merely postponing the growth impact for another day."
Although some sectors were revised lower, Brusca said "still it is a positive rate of growth and represents a nearly 3.0 point acceleration from the second quarter rate of growth. And, most importantly, the recovery game is on."
Although many economists say the US recession is over, an official declaration has yet to come from the private National Bureau of Economic Research, seen as the official arbiter of business cycles.
The NBER panel does not use the definition employed in many countries of recession as two consecutive quarters of declining GDP. It says a recession is "a significant decline in economic activity spread across the economy," with drops in output, income, employment and sales.