WASHINGTON (AP) — The U.S. economy slowed sharply in the summer, reflecting a cutback in businesses' stockpiling of goods, which offset strength in consumer spending.
The Commerce Department said Thursday that the economy, as measured by the gross domestic product, grew at a tepid annual rate of 1.5 percent in the July-September quarter, less than half the 3.9 percent growth rate for the previous quarter.
The major reason for the slowdown was a push by businesses to reduce unwanted stockpiles, which slashed 1.4 percentage points from last quarter's growth. Consumer spending remained solid, rising at a 3.2 percent rate, down only slightly from the previous quarter.
Analysts generally say the summer slowdown will be temporary. Most forecast that businesses will resume building inventories this quarter in response to further gains in consumer spending.
Last quarter's slump marked the latest turn for an economy that began 2015 on a rocky note as a severe winter and West Coast port disruptions essentially stalled growth. The economy rebounded in the April-June quarter before weakening again in the summer.
For all of 2015, after all the ups and down, the economy is expected to expand around 2.3 percent, close to last year's modest 2.4 percent growth.
One of the factors that have depressed growth has been a widening trade deficit. A sharp slowdown in China and weakness in other key U.S. trading partners have hurt U.S. exports. A higher-value dollar has compounded the problem by making American-made products costlier abroad.
The slowdown in export sales contributed to the buildup of unsold goods that U.S. businesses have been trying to work down. Still, that reduction in supplies should set the stage for stronger growth in the final three months of the year as businesses restock.
The U.S. economy is benefiting in the meantime from a still-solid pace of consumer spending, which drives about 70 percent of economic activity and which analysts expect to continue. Though the pace of hiring weakened over the past two months, steady job growth has helped shrink the unemployment rate to a seven-year low of 5.1 percent. Wages have yet to rise significantly for most people, but more jobs have meant more people have money to spend.
Most economists expect hiring to pick up in the final stretch of the year and make consumers more likely to spend during the holiday shopping season. A renewed decline in energy prices is also giving consumers more money to spend on other goods and services.