Inventories provided a boost to GDP growth rather than being a drag as first estimated. Stockpiles contributed 0.77 percentage points to growth, compared with a prior estimate that showed they subtracted 0.12 percentage point. At the same time, larger inventories mean businesses may limit production in the fourth quarter unless demand accelerates.
The economy faces more hurdles this quarter and next. Sandy, the largest Atlantic storm ever to hit the U.S. may trim as much as 0.5 percentage point from fourth-quarter GDP, according to Jan Hatzius, chief economist at Goldman Sachs Group Inc. in New York. Reconstruction work could add as much as 0.75- point point to GDP in the first quarter of 2013, he estimates.
The job market, albeit improving, will reflect a setback from Sandy for some months. Payrolls rose by 100,000 workers in November after climbing 171,000 the prior month, according to the Bloomberg survey median ahead of Labor Department data due Dec. 7. The unemployment rate probably held at 7.9 percent.
Businesses are likely to resume hiring and capital spending next year once lawmakers reach a resolution on fiscal policy. Orders for capital goods excluding defense equipment and aircraft, a proxy for future business investment, climbed 1.7 percent in October, the most in five months, Commerce Department figures showed Nov. 27.
Xerox Corp., the Norwalk, Connecticut-based provider of printers and business services, is among companies waiting for the outlook to become clearer. While the U.S. “got a bit weaker” during the third quarter mainly due to the uncertainty around the fiscal cliff, a “positive conclusion” is expected, according to Chief Financial Officer Luca Maestri.
“We may see an improved economic environment in the U.S. going into 2013,” Maestri said on a conference call with analysts yesterday. “For the moment, we continue to foresee this level of softness until the issues in Washington have resolved.”
Fed Chairman Ben S. Bernanke has said an agreement on reducing long-term federal budget deficits without abrupt tax increases and spending cuts would remove a barrier to growth.
“A plan for resolving the nation’s longer-term budgetary issues without harming the recovery could help make the new year a very good one for the American economy,” Bernanke said in a Nov. 20 speech.