Next quar­ter’s growth may slow


Austin American-Statesman - - BUSINESS - Con­tin­ued from B


Con­sumer spend­ing is closely watched be­cause it ac­counts for about 70 per­cent of eco­nomic ac­tiv­ity.

A sep­a­rate government report Fri­day showed that or­ders to U.S. fac­to­ries for non­durable goods rose a solid 0.7 per­cent in Novem­ber. And a key cat­e­gory that tracks busi­ness in­vest­ment spend­ing gained sharply for a sec­ond straight month.

“De­spite con­cerns about the fis­cal cliff, busi­nesses ap­pear to have boosted spend­ing at year end,” said Sal Gu­atieri, se­nior econ­o­mist at BMO Cap­i­tal Mar­kets.

He said his forecast that the econ­omy would grow at an an­nual rate of 1.5 per­cent in the Oc­to­berDe­cem­ber quar­ter might need to be re­vised higher.

Paul Ash­worth, se­nior econ­o­mist at Cap­i­tal Eco­nom­ics, said that based on Fri­day’s re­ports, he’s re­vis­ing up his es­ti­mate of growth for this quar­ter to an an­nual rate be­tween 1.5 per­cent and 2 per­cent.

On Thurs­day, the government said the econ­omy grew at an an­nual rate of 3.1 per­cent in the July-Septem­ber quar­ter, more than twice the 1.3 per­cent growth rate from April through June. Part of the im­prove­ment came from a 1.6 per­cent in­crease in con­sumer spend­ing, slightly bet­ter than in the spring.

But an­a­lysts think eco­nomic growth has slowed in the Oc­to­ber-De­cem­ber quar­ter to an an­nual rate be­low 2 per­cent. Un­cer­tainty about whether or how the fis­cal cliff will be re­solved has led some busi­nesses to de­lay or re­duce hir­ing and in­vest­ment in ma­jor equip­ment.

Many econ­o­mists ex­pect no im­prove­ment in the Jan­uary-March quar­ter. The lat­est forecast from a panel of 48 econ­o­mists with the Na­tional As­so­ci­a­tion for Busi­ness Eco­nom­ics is that the econ­omy will ex­pand at an an­nual rate of 1.8 per­cent in the first quar­ter of 2013. Growth at that pace is con­sid­ered too weak to sig­nif­i­cantly lower the un­em­ploy­ment rate, now at 7.7 per­cent.

But econ­o­mists say growth could strengthen in 2013 if Congress and the ad­min­is­tra­tion re­solve their bud­get de­bate in a way that doesn’t too dras­ti­cally raise taxes or cut government spend­ing.

The Fed­eral Re­serve ended a pol­icy meet­ing last week by de­cid­ing to ex­tend its cur­rent level of $85 bil­lion in monthly bond pur­chases in­def­i­nitely to try to keep longterm in­ter­est rates low.

The Fed also for the first time tied any in­crease in a key short­term in­ter­est rate to a sub­stan­tially im­proved job mar­ket. It said it planned to keep banks’ overnight lend­ing rates at a record low near zero un­til un­em­ploy­ment has fallen be­low 6.5 per­cent — as long as the out­look for in­fla­tion re­mains tame.

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