GDP shows consumers splurged in 3Q, but lack confidence now

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By JEANNINE AVERSA/The Associated Press

WASHINGTON — Splurging shoppers helped the economy hum along faster than first thought in the third quarter, but high energy prices could weigh on consumers in the months ahead.

Gross domestic product — the value of all goods and services produced within the United States — increased at an annual rate of 3.9 percent in the July-to-September quarter, the Commerce Department reported Tuesday.

"I think the economy has found its groove," said Mark Zandi, chief economist at Economy.com.

But sinking confidence among consumers raised new questions about their appetite to spend in coming months. The Conference Board's Consumer Confidence Index fell to an eight-month low of 90.5 in November, the fourth month in a row that confidence declined.

"I think the decline in consumer confidence hoists a little yellow warning flag," said Richard Yamarone, economist at Argus Research Corp.

The new GDP figure was up from an initial estimate of a 3.7 percent growth rate for the third quarter and was better than a 3.3 percent pace posted in the second quarter.

The main reasons for the improvement: stronger consumer spending, which grew at a 5.1 percent pace, the fastest clip since the end of 2001, and more robust business investment in equipment and software. Better growth in U.S. exports also helped.

Stuart Hoffman, chief economist at PNC Financial Services Group, expects GDP to slow to 3.25 percent in the October-to-December quarter. Others think it could clock in at around a 4 percent pace. In either scenario, though, most analysts don't expect consumers will be as enthusiastic as they were in the third quarter.

High energy prices and unease about the job climate are affecting consumers' feelings about the economy's direction, analysts said.

The jobs recovery — while improving — isn't as firmly rooted as the economy's recovery.

Analysts predict that employers expanded payrolls by around 200,000 in November. The government will release the employment report for November on Friday.

One measure of after-tax profits in the GDP report showed profits shrank by 2 percent in the third quarter from the previous quarter. Analysts said profits were restrained by a string of hurricanes that ripped through the Southeast, high energy prices and slower productivity. But profits are up by 8.1 percent from the third quarter a year ago.

Business spending on equipment and software, however, grew at a sizable 17.2 percent annual rate in the third quarter— up from the second quarter's 14.2 percent pace.

On the Net:

GDP report: http://www.bea.gov/bea/dn/home/gdp.htm