The Bureau of Economic Analysis revised third quarter U.S. GDP growth to 2.1% from the flash report of only 1.5%. Most of the revised gain was due to inventory adjustments, which may constrain fourth quarter growth. On a year-over-year basis the economy continues to track along a 2.2% to 2.4% growth trend. Inflation continues to be below the Fed target of 2% for both the core and headline personal consumption expenditure (PCE) indices. Weak demand and low energy prices are expected to keep inflation below the Fed target throughout 2015 and most of 2016. The unemployment rate is 5%, close to what may be full employment given current conditions. Nevertheless, capacity utilization remains well below full employment levels with ample room for expansion before excess demand pressures and bottlenecks introduce inflation pressures.
The U.S. economy expanded at a 2.0% rate in the third quarter, slower than the prior estimate of 2.1%. The downward revision was the outcome of a larger trade deficit stemming from a strong U.S. Dollar, weak global demand and falling commodity prices. Volatile business inventories reduced more than expected, resulting in a lower GDP growth. The fourth quarter is expected to grow 1.5%.