The U.S. economy perked up slightly this summer, driven largely by businesses re-stocking their shelves, a rise in consumer spending, and the ongoing housing recovery.
Gross domestic product — the broadest measure of economic activity — rose at a 2.8% annual rate in the third quarter, according to the Bureau of Economic Analysis.
That marked the fastest growth in a year and was stronger than economists had anticipated.
Spending on both housing and commercial real estate boosted growth, as did consumer spending on goods ranging from groceries to cars. Businesses also built up their inventories.
Meanwhile, federal budget cuts held back growth for the fourth consecutive quarter. That said, the drag is starting to wane, and over the summer, state and local governments ramped up their spending and investments enough to compensate for federal cuts.
It’s unclear whether that will continue. This report does not yet reflect the government shutdown in October, which put thousands of federal workers temporarily out of a job and halted some government work for 16 days.
“The economy is trying to run at a faster pace, but lawmakers keep throwing up speed-bumps,” said Sal Guatieri, senior economist for BMO Capital Markets.
While 2.8% growth is stronger than the 1.9% economists were expecting, it’s still not considered robust enough to bring down the unemployment rate fast enough.
Economists generally hope for at least 3% growth each year to bring the unemployment rate down by one percentage point.
At the end of September, 11.3 million people said they could not find work, and the unemployment rate stood at 7.2%.
