No third-quarter bounce for US economy

The economy slowed in the third quarter due in part to the collapse of one of Delta Air Lines’ models, the US Bureau of Economic Analysis (BEA) said. The agency estimated on Friday that…

No third-quarter bounce for US economy

The economy slowed in the third quarter due in part to the collapse of one of Delta Air Lines’ models, the US Bureau of Economic Analysis (BEA) said.

The agency estimated on Friday that gross domestic product grew at an annual rate of 2.2% in the July-September period, slowing from the previous quarter’s 2.9% jump and far below the 3.0% pace projected in a recent Reuters poll.

In its advance estimate, the BEA also raised its estimate of third-quarter growth by 0.2 percentage point to 2.3%. The third-quarter increase followed a 2.5% increase in the second quarter.

The economy grew 2.5% in 2016 after expanding 2.4% in 2015.

An inventory reversal added 0.14 percentage point to GDP growth in the third quarter, reversing the drag of 0.35 percentage point in the prior period.

A surge in Delta’s share price, as much as 11% in early trading, is likely related to the BEA’s data, according to some analysts.

The Atlanta Federal Reserve in a note said the data “could provide a lift to the NYSE estimate of Delta’s Q3 EPS, which has been adjusted for a lower share count”.

Atlanta Fed economists were expecting Delta’s revenue-per-available-seat-mile to have jumped 11.4% in the quarter.

“The underlying data are unlikely to be as strong,” wrote Sara Glave, an analyst at S&P Global Market Intelligence, adding that it would be a stretch to see the BEA provide stronger evidence of a ‘dollar effect’ on GDP growth as well.

Growth this year has been sluggish in part because of a strong dollar that has made American goods more expensive abroad.

The Commerce Department last month estimated that economic growth slowed in the third quarter to a 2.4% annual rate from a 3.5% pace in the second quarter. The economy expanded 2.2% in the third quarter of 2016.

The BEA said Friday’s data showed private consumption grew at a 2.5% pace in the third quarter, the same as the prior period, following a 1.4% rise in the second quarter.

Data on home sales were also disappointing, the department said.

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