U.S. GDP Shows Weak 1.6% Growth in Q3

by: Judith Levy

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

U.S. GDP Slows to 1.6% Rate in Quarter [MarketWatch.com]

Summary: During Q3, U.S. gross domestic product slowed to an annual rate of 1.6% -- below the 2% forecast by economists and the slowest in three years. The economy has grown at a glacial 2.9% overall on the year so far. The report was a pail of cold water over the head of the Dow, which has set record highs in 13 of the last 19 sessions. Stocks opened lower after the report, the dollar fell in early trading, and Treasuries advanced. The housing slowdown appears to be the main culprit: investments in housing fell 17.4% in the quarter, the steepest slide since Q1 of 1991. Consumer spending, however, accelerated 3.1%, up from 2.6% in Q2, an indicator that some maintain augurs well for the economy despite the overall growth slowdown. The trade balance was a negative (exports increased 6.5% while imports rose 7.8%) but inventories proved less of a drag than expected. The weak auto sector scarcely made a dent in the report: motor-vehicle output added 0.7% to growth and consumer spending on cars added 0.4%.
Related links: Despite the Recent Market Run-Up, I'm As Bearish As EverA Contingency Plan If the Market Breaks DownDeflating Housing Bubble = Comfy Landing for EquitiesEconomists Chalk Up Weak GDP To Housing, Praise Consumers [Wall Street Journal] • GDP Report Triggers Selloff [Wall Street Journal]

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