U.S. economic growth slows

The U.S. economy grew at a tepid 2% annual rate in the third quarter, hurt by the sharpest housing slump in 15 years, while mid-Atlantic region business activity stumbled in December, data showed Thursday.

The growth rate for gross domestic product, the broadest measure of economic activity within U.S. borders, was revised down in the July-September period from 2.2% estimated a month ago, the Commerce Department said.

That was a slowdown from the second quarter’s 2.6% rate of GDP increase.

Another report from the Philadelphia Federal Reserve Bank implied persistent economic softening.

Its business activity index for the mid-Atlantic region fell to minus 4.3 in December from 5.1 in November -- the third month in the last four it has been negative.

“At the end of the year, the economy is weak and a quick turnaround is not clear,” said Robert Brusca, chief economist for New York-based Fact and Opinion Economics.

The third-quarter GDP figure was revised down because consumer spending on services was softer than thought before, the department said.

The GDP report said so-called core prices, which exclude food and energy items, slowed to 2.2% in the third quarter from 2.7% in the second quarter.

Analysts said the slower quarterly rise in prices was reassuring.

“The worst of inflation is behind us,” said Christopher Low, chief economist for FTN Financial in New York.

However, Richmond Federal Reserve Bank President Jeffrey Lacker made clear to a business group in Charlotte, N.C., that inflation is a serious risk.

“The longer core inflation persists above 2%, the greater the danger of inflation becoming entrenched at too high a rate,” said Lacker, who dissented at the last four Fed policy sessions against its majority decision to keep rates steady and instead said increases were needed.

On a year-over-year basis, third-quarter core prices rose 2.4% -- the strongest since a matching 2.4% in the second quarter of 1995 -- after gaining 2.2% year-over-year in the second quarter.

A midmorning report from the New York-based Conference Board, a private research group, underlined the uncertainty in the economic outlook.

Its U.S. index of leading economic indicators rose 0.1% to 138.2 in November, the same as in October but down from a 0.4% pickup in September, pointing to a likely slow start next year but not necessarily a downturn.

Separately, the Labor Department said 9,000 more workers applied for first-time jobless benefits last week, for a total of 315,000 and roughly the number that analysts had forecast.

A monthly index of national activity compiled by the Chicago Federal Reserve Bank, also issued Thursday, showed a slight improvement in November but still pointed toward growth that is likely to stay below historical trends.

The GDP report showed business spending grew at a 10% rate in the third quarter, the same rate estimated a month ago, and more than twice the 4.4% rate posted in the second quarter.

Corporate profits after taxes increased by a revised 4.2% rate in the third quarter, down modestly from last month’s estimated 4.6%, and a strong gain from the second quarter’s meager 0.3% rise in profits.