Exports, government spending buoy US growth

Updated 20 December 2012
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Exports, government spending buoy US growth

WASHINGTON: The US economy grew faster than previously estimated in the third quarter as exports and government spending provided a lift, but that boost is likely to be lost amid slowing global demand and a move towards tighter fiscal policy.
A second report yesterday suggested job growth remained modest, with first-time applications for state unemployment benefits rising last week. However, they were in the low end of their range before Superstorm Sandy struck in late October.
Gross domestic product expanded at a 3.1 percent annual rate, the Commerce Department said, a step-up from the 2.7 percent pace it reported last month.
It was the fastest growth since late 2011 and also reflected a slightly better pace of consumer spending than previously estimated. Economists had expected GDP growth would be raised to a 2.8 percent pace.
In a separate report the Labor Department said initial claims for jobless benefits increased 17,000 to a seasonally adjusted 361,000. The data covered the survey period for December nonfarm payrolls.
"The pace of hiring is still disappointing with firms concerned about the impact of the fiscal cliff on demand," said Tanweer Akram, a senior economist at ING Investment Management in Atlanta, adding that the pace of GDP growth in the current quarter "remains quite soft."
The so-called fiscal cliff refers to $ 600 billion in automatic government spending cuts and higher taxes that could be drained from the economy early next year unless an agreement is reached on a less punitive plan to reduce budget deficits.
Tighter fiscal policy and a cooling global economy could weigh on the domestic economy in the coming quarters.
Job gains so far this year have averaged 151,000 per month, a pattern that is likely to hold through December. The sluggish labor market is constraining spending.
Growth in the third quarter was revised higher to show a much faster pace of export growth and the first decline in imports in more than three years.

Exports grew at a 1.9 percent rate, rather than 1.1 percent, helping to narrow the trade deficit. Trade contributed 0.38 percentage point to GDP growth. The drop in imports is a sign of weak domestic demand.
Government spending was revised to a 3.9 percent growth rate from 3.5 percent, boosted by a rebound in state and local government outlays. It added three quarters of a percentage point to GDP growth in the third quarter.
While growth in consumer spending, which accounts for about 70 percent of US economic activity, was raised by 0.2 percentage point to a 1.6 percent rate, that was mostly due to increased spending on healthcare.
Business inventories were trimmed to $ 60.3 billion from $ 61.3 billion. Restocking by businesses contributed 0.73 percentage point to GDP growth.
Given the sluggish spending pace, some of the inventory accumulation might have been unplanned, suggesting businesses will need to liquidate stocks this quarter because of weak demand.
Excluding inventories, GDP rose at a revised 2.4 percent rate. Final sales of goods and services produced in the United States had been previously estimated to have increased at a 1.9 percent pace.
Elsewhere, details of the report were mixed. Business spending was revised to show cutbacks that were not as sharp as previously reported. Business investment fell at a 1.8 percent rate instead of a 2.2 percent decline. That was the first drop since the first quarter of 2011.
Part of the drag in business investment, which had been a source of strength for the economy, came from equipment and software, where spending was the weakest since the second quarter of 2009.
The report also showed that after-tax corporate profits rose at a 2.5 percent rate in the third quarter rather than 3.3 percent.


US unveils new veto threat against WTO rulings

Updated 23 June 2018
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US unveils new veto threat against WTO rulings

  • US tells WTO appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days
  • Trump, who has railed against the WTO judges in the past, threatens to levy a 20 percent import tax on European Union cars

GENEVA: The United States ramped up its challenge to the global trading system on Friday, telling the World Trade Organization that appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days.
The statement by US Ambassador Dennis Shea threatened to erode a key element of trade enforcement at the 23-year-old WTO: binding dispute settlement, which is widely seen as a major bulwark against protectionism.
It came as US President Donald Trump, who has railed against the WTO judges in the past, threatened to levy a 20 percent import tax on European Union cars, the latest in an unprecedented campaign of threats and tariffs to punish US trading partners.
Shea told the WTO’s dispute settlement body that rulings by the WTO’s Appellate Body, effectively the supreme court of world trade, were invalid if they took too long. Rulings would no longer be governed by “reverse consensus,” whereby they are blocked only if all WTO members oppose them.
“The consequence of the Appellate Body choosing to breach (WTO dispute) rules and issue a report after the 90-day deadline would be that this report no longer qualifies as an Appellate Body report for purposes of the exceptional negative consensus adoption procedure,” Shea said, according to a copy of his remarks provided to Reuters.
An official who attended the meeting said other WTO members agreed that the Appellate Body should stick to the rules, but none supported Shea’s view that late rulings could be vetoed, and many expressed concern about his remarks.
Rulings are routinely late because, the WTO says, disputes are abundant and complex. Things have slowed further because Trump is blocking new judicial appointments, increasing the remaining judges’ already bulging workload.
At Friday’s meeting the United States maintained its opposition to the appointment of judges, effectively signalling a veto of one judge hoping for reappointment to the seven-seat bench in September.
Without him, the Appellate Body will only have three judges, the minimum required for every dispute, putting the system at severe risk of breakdown if any of the three judges cannot work on a case for legal or other reasons.
“Left unaddressed, these challenges can cripple, paralyze, or even extinguish the system,” chief judge Ujal Singh Bhatia said.
Sixty-six WTO member states are backing a petition that asks the United States to allow appointments to go ahead. On Friday, US ally Japan endorsed the petition for the first time, meaning that all the major users of the dispute system were united in opposition to Trump.