U.S. GDP Grows 2% in Q3; Consumers Spending More, But Buying Power Eases

October 26, 2012 9:09 AM EDT
U.S. gross domestic product (GDP) grew more than expected in the third quarter, according to new data out from the U.S. Bureau of Economic Analysis on Friday.

For the three months ended September 2012, GDP rose 2.0 percent, up from a 1.3 percent pop the preceding quarter. Estimates pegged growth at about 1.8 percent.

Recent gains in housing and limited unemployment losses have helped to boost consumer confidence. The most recent University of Michigan survey came in at 93.1 for October, leagues above the 78.5 reading expected by analysts.

The U.S. BEA commented, "It is difficult for the domestic economy to grow any more robustly, given the relatively soft pace of consumption and investment, weak sentiment among businesses, continued austerity for state and local government spending, weak exports, and the looming "fiscal cliff." Moreover, the negative headwinds from Europe and Asia look to be more persistent than previously thought. On the plus side, housing is finally turning into a positive factor after a long decline."

Analysts also suspect that the drought which ravaged uncountable acres of crops in the Midwest hampered GDP by a a few tenths of a point.

However, today's GDP report in an advanced one, with another out in November and the final reading in December.

Consumer purchase grew 2 percent, from 1.5 percent the prior quarter. The number was slightly below a Bloomberg survey of 2.1 percent. Consumer purchasing power grew 0.8 percent, the slowest rate since the end of 2011, data show.

U.S. markets are indicated lower ahead of the bell Friday.

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