US economic growth slowest this year

US economic growth slowed in the third quarter, but beat some economists’ expectations of a bigger contraction.

The Commerce Department data put GDP growth at 1.9% during the three months, ahead of the 1.6% predicted.

Consumer spending held up better than expected, offsetting a fall in business investment and lower public spending.

But the growth was still the slowest for 2019, and comes hours before the Federal Reserve is due to make its latest interest rate announcement.

GDP growth in the previous quarter – the three months to end-June – was just below 2%. In 2018, the US economy grew by 3.4% in the third quarter.

The Trump administration’s trade war with China has eroded business confidence, while the fading stimulus from last year’s $1.5tn tax cut package is also casting a shadow on the expansion.

However, Wednesday’s figures, suggesting resilient consumer spending and strong-than-expected housebuilding, is likely to ease fears that the US will enter recession.

Growth in consumer spending, which accounts for more than two-thirds of US economic activity, slowed to a still-healthy 2.9% rate last quarter after surging at a 4.6% pace in the second quarter, the fastest since the fourth quarter of 2017. Consumer spending is being powered by the lowest unemployment rate in nearly 50 years.

Rate cut?

Ahead of the GDP figures, US Treasury Secretary Steven Mnuchin said global growth is slowing and has had a modest impact on the US, adding the US economy remained strong with good capital inflows.

“There is no question that the global economy is slowing down and that has had some modest drag on the US economy,” he said at an investment conference in the Saudi Arabia capital Riyadh.

Later on Wednesday, the US central bank was expected by many economists to wrap up its two-day policy meeting with an announcement of a cut in interest rates.

“Nothing in today’s report will surprise the Fed,” said Sal Guatieri, a senior economist at BMO Capital Markets. “The capital expenditure crunch stemming from the trade war will motivate a third rate cut. However, a still-sturdy consumer could give reason for pause at future meetings.”