Trade, defense buoy U.S. economy, but some weakness creeps in
By Lucia Mutikani
WASHINGTON (Reuters) - A smaller trade deficit and surge in defense spending buoyed U.S. economic growth in the third quarter, but domestic demand slipped, hinting at some loss of momentum.
Gross domestic product grew at a 3.5 percent annual pace, the Commerce Department said on Thursday. However, the pace of growth in business investment, housing and consumer spending slowed from the second quarter.
"The report was broadly constructive, but with weakness emerging in housing and consumption spending, we expect the pace of growth to slip further in the fourth quarter," said Millan Mulraine, deputy chief economist at TD Securities in New York.
Despite decelerating from the second quarter's robust 4.6 percent growth rate, it was the fourth quarter out of five that the economy has expanded at or above a 3.5 percent clip.
Signs the economy has moved to a healthy growth track have done little to bolster Obama's Democrats, who look to lose control of the Senate in mid-term elections on Tuesday that will be importantly shaped by voters views on jobs and growth.
The third-quarter gain in output outstripped economists' expectations, but growth in domestic demand braked to a 2.7 percent pace after a brisk 3.4 percent gain in the April-June period, giving the report a softer tenor.
A separate report from the Labor Department showed first-time applications for unemployment benefits rose marginally last week, but a measure of underlying trends hit its lowest level since May 2000 in a show of labor market strength.
The data came one day after the Federal Reserve ended its asset purchasing program and said there was sufficient underlying strength in the economy to continue whittling away at unemployment. Continued...