US Q3 GDP slows less than expected, investment weak

America's economy slowed a tad less than expected in the third quarter, but investment was weak, according to some economists.

According to a preliminary estimate from the Department of Commerce, US gross domestic product expanded at a quarterly annualised pace of 3.5% over the three months to September, down from a clip of 4.2% over the previous three months.

Economists had penciled-in growth of 3.3%.

The government said a reduction in export sales, together with increased purchases of goods and services from abroad, and a deceleration in non-residential fixed investment, were the main drags on levels of activity, partly offset by a faster pace of inventory building.

Household spending picked-up from the 3.8% clip observed in quarter two to 4.0% - to its fastest since 2014 - even as the rate of growth in non-residential fixed investment slipped to 0.8%, its weakest pace in nearly two years.

Within the latter, spending on structures dropped by 7.9%, partly a reflection of decreased spend on oil production.

Non-residential fixed investment, which includes outlays on equipment, structures and intellectual property, added just 0.12 points to GDP, down from 1.1% points over the three months to June.

On that note, Pooja Sriram at Barclays Research said: "The weak spot in today’s report was business fixed investment, with structures, equipment and residential investment all slowing considerably in Q3. This suggests that the corporate tax cuts have not induced much capital accumulation."

Outlays by the public sector also accelerated, from 2.5% to 3.3%. Combined, private consumption and public sector spending added 3.25 points to the quarterly rate of growth in GDP.

As for net foreign demand, exports were down by 3.5% while imports surged by 9.1%, subtracting 1.8 percentage points from the rate of GDP growth. The reversal was largely the result of foreign buyers front-running new tariffs from the US in the second quarter.

Final demand sales, a measure of GDP that strips out the contributions from inventory stockpiling and net exports, slowed from 4.0% to 3.1%.

Inventory stockpiling by the private sector contributed 2.1 points to GDP, versus a drag of -1.2 points in the preceding period.

On the inflation front, the price index for gross domestic expenditures was ahead by 1.7%, versus a rise of 2.4% in the second quarter.

To take note of, the personal savings rate reduced from 6.8% over the second quarter to 6.4% over the latest three-month stretch.

Year-on-year, US GDP growth hit 3.0%.