The Chancellor’s boasts that Britain was growing faster than any other advanced economy were scuppered within hours after a significant growth upgrade for the US.
George Osborne reported during the Autumn Statement that the nation was “currently growing faster than any other major advanced economy … faster even than America”. But shortly after the Chancellor sat down, official figures were published across the Atlantic which sharply revised up US growth in the third quarter to an annualised pace of 3.6 per cent from the 2.8 per cent estimated a month earlier. This equals a quarterly growth rate of 0.9 per cent for the US between July and September, edging ahead of the UK’s 0.8 per cent pace.
The stronger performance marks the fastest pace for the world’s biggest economy since early 2012, although the detailed picture was more worrying. Nearly half the growth came from a build-up in business stockpiles, a trend that could reverse in the current quarter and hold back the advance. Consumer spending remained at its lowest ebb in nearly four years.
The figures come amid speculation over when the US Federal Reserve will slow its $85bn (£52bn)-a-month quantitative easing, which has been running for more than a year. The Fed was expected to begin “tapering” in September but worries over the jobs market stayed action.
Traders sold off US Treasury bonds following the strong numbers but economists believe an imminent slowdown in stimulus from the Fed is by no means a done deal. ING Bank’s economist Rob Carnell said: “As with the first release, the headline number may suggest an earlier taper, perhaps December or January, but more digging into the data suggests that this economy is still running at only an underlying rate of between 2 and 2.5 per cent. An earlier scheduling of the taper is far from obvious.”
Stripping out the boost from stockpiling, the US economy grew at a rate of around 0.5 per cent rate in the third quarter, slower than earlier in the year and in line with the same below-trend rate the nation has seen since emerging from recession in 2009. “There’s no momentum here,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics, who predicts overall economic growth could slip below 2 per cent in the current quarter. Daiwa Capital Markets’ analyst Michael Moran added: “Businesses will manage stocks more cautiously during the fourth quarter.”
Economists will also be keeping a wary eye on US shoppers – who account for around 70 per cent of the economy – after consumer spending rose at a 1.4 per cent annual pace, the slowest since the end of 2009.
In October, spending at retail businesses rose solidly, US exports grew to a record level and employers added 204,000 jobs. But initial reports on holiday shopping over the critical Thanksgiving Day weekend have been disappointing. The National Retail Federation estimates that sales over the four-day weekend fell for the first time since the group began keeping track in 2006.