Cautious consumers seen curbing U.S. economic growth

Thu Nov 7, 2013 1:07am EST
 
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. economic growth likely slowed a bit in the third quarter as consumers kept a lid on spending, supporting the Federal Reserve's decision to maintain its current pace of bond purchases to stimulate activity.

Gross domestic product probably expanded at a 2.0 percent annual rate, according to a Reuters poll of economists, moderating from a 2.5 percent clip in the second quarter.

The anticipated deceleration will also reflect a pullback in business spending and some ebbing in home building as a run-up in interest rates over the summer took a toll.

The Commerce Department's first estimate of third-quarter GDP on Thursday at 8:30 a.m. will offer confirmation that the economy lost momentum even before October's 16-day government shutdown, which is expected to weigh on growth over the final three months of the year.

"There are no signs that the economy is picking up," said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York. "If you add the shutdown to an already subdued underlying trend, it's difficult to see the economy taking off in the near term."

The economy grew at a 1.8 percent rate in the first half of 2013, held back by a tightening in fiscal policy at the start of the year. Growth had been expected to gain speed in the fourth quarter as the drag from fiscal policy lifted.

The report is expected to paint a picture of anemic domestic demand and could be seen as validating the Fed's decision to stick to its $85 billion monthly bond-buying program.

With near-term growth prospects not that bright, a reduction in the purchases, which aim to keep interest rates low, is not expected this year.   Continued...

 
A woman riding an electric cart shops with a child at a Walmart Supercenter in Rogers, Arkansas June 6, 2013. REUTERS/Rick Wilking