WASHINGTON — The U.S. economy grew at an annualized rate of 2 percent from July to September, the government reported Friday, a tepid showing that underscored a sluggish recovery.
The growth rate in the gross domestic product, the broadest measure of trade in U.S. goods and services, represented good news in that it fell within the range of analysts’ expectations.
The figures also represented an improvement over the revised annualized growth rate of 1.7 percent recorded during the period from April through June.
“The GDP numbers show that the economic recovery remains intact, but is very fragile,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics in West Chester, Pa. “Two percent growth is not sufficient to generate enough jobs to even forestall a further increase in unemployment, which is drifting higher.”
High unemployment, lingering above 9 percent nationally, remains a concern to economists.
And Americans’ wages and benefits are nearly flat, rising only 0.4 percent for the quarter. That figure isn’t expected to improve anytime soon, because with few jobs available workers have little bargaining power.
“We need to do better than this to get a real recovery in the labor market,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.
Another reason for concern, analysts say: The drivers of growth in the newly released data - businesses replenishing inventory and federal stimulus spending - will fade out in coming months.
“The good news in the report is that exports and business fixed investment in equipment and software remain sturdy,” Zandi said. “These are the key to the nation’s long term growth prospects.”
Consumer spending rose by an annualized rate of 2.6 percent in the third quarter, up from 2.2 percent the previous three months, a sign that people are loosening their purse strings a bit.
Some analysts were cheered by the details among Friday’s numbers.
“For the second quarter in a row, the underlying details of the GDP report have been significantly stronger than forecasters were expecting,” RDQ Economics, a New York forecaster, said in a research note.
It said GDP growth would have been higher if the rising demand for goods hadn’t also resulted in a huge growth in imports. Imports subtract from the GDP, which measures domestically produced goods and services. Imports grew at an annualized rate of 33.5 percent in the second quarter and 17.4 percent in the third quarter.
“The only moderate gains in real GDP that resulted from this strong demand growth were a consequence of surging import growth,” RDQ Economics said. “As a result, domestic demand growth over the last two quarters has outpaced real GDP growth by the widest margin since 1948!”
The sizzling pace of import growth is likely to put even more pressure on the Obama administration to press China for greater access for U.S. exports and a revaluation of its currency, the yuan, which critics say is significantly undervalued.
This year’s tepid economic growth rate leaves the United States vulnerable to shocks, and that’s why the Federal Reserve is expected next week to take the unusual step of purchasing between $100 billion and $200 billion in long-term government bonds.
The step, called quantitative easing, hadn’t been tried before the most recent recession. The Fed hopes that the move will drive down interest rates on government debt and impel investors to move their money from government debt to other investments that support economic activity.
But even if the Fed’s plan works, economists say it is likely to provide modest GDP help, perhaps a couple of tenths of a percentage point in the fourth quarter. Unemployment is still expected to be above 9 percent by the end of this year.
“The poor job picture is the Achilles’ heel of the economy,” economist Sung Won Sohn of California State University at Channel Islands said.
A separate report Friday showed that confidence among U.S. consumers fell in October to the lowest level in almost a year.
The Thomson Reuters/ University of Michigan final index of consumer sentiment in October decreased to 67.7 from 68.2 in September. Economists had forecast a reading of 68, almost matching the preliminary figure of 67.9, according to the median estimate in a Bloomberg News survey.
“Households remain worried about the economy,” Steven Wood, president of Insight Economics LLC in Danville, Calif., said in a note to clients. “It is unlikely that sentiment will improve to truly optimistic levels until robust job creation returns.”
The October confidence figure was the lowest since November 2009 and could temper consumer spending, the biggest part of the economy.
Still, stock-market gains and reduced debt could encourage consumers to overcome some of their doubts. The National Retail Federation has forecast November-December sales will rise 2.3 percent from a year ago, making it the best Christmas shopping season in four years.
Wal-Mart Stores Inc., Target Corp., Amazon.com Inc. and EBay Inc. are among merchants that will benefit as shoppers seek bargains, according to results of a survey issued this month by Consumer Edge Research in Stamford, Conn.
Some analysts expect the final quarter of the year to show stronger growth. Historically, the stock market fares better at year’s end, and the unresolved issue of whether to extend the Bushera tax cuts may spur spending by wealthier Americans. Congressional Democrats and Republicans have failed to agree on whether to extend some or all of the reductions, which are to expire at the end of this year.
Friday’s data constituted the last such release before Tuesday’s general elections, and each political party is likely to use the GDP figures. Democrats can point to an economy that has grown for five consecutive quarters, coming out of the deepest downturn since the Great Depression. Republicans can point to a stumbling economy that can’t pick up enough steam to knock down the unemployment rate and relax consumer worries.
“This remains a historically slow recovery. Never since World War II has it taken so long to recover to pre-recession levels of GDP,” said Josh Bivens, an economist with the Economic Policy Institute, a liberal research organization.
Information for this article was contributed by Kevin G. Hall of McClatchy Newspapers, by Shobhana Chandra and Alex Kowalski of Bloomberg News, and by Jeannine Aversa and Alan Fram of The Associated Press.
Front Section, Pages 1 on 10/30/2010