Perpetual head of investment market research Matt Sherwood said that although the headline figure was up 0.8 percentage points on the previous quarter, the details of the report showed no real improvement.
“US economic growth won't materially accelerate until household income increases, and this is very hard to do with interest rates no longer declining and with government spending growth now contracting,” said Mr Sherwood.
With household income remaining close to recessionary levels relative to other cycles, Mr Sherwood believes this slowed consumption growth over the quarter, which accounted for only one per cent of total growth, despite improving payrolls.
“This suggests that spending growth per worker remains highly anaemic,” he said.
Mr Sherwood argued that the final sales of domestic product offered the best indication of how the domestic economy was performing. The figure for domestic product sales was two per cent for this quarter, down slightly from the previous quarter figure of 2.1 per cent.
“This suggests that US economic growth remains mediocre despite improvements in housing investment (+0.4 per cent), net exports (+0.3 per cent) and state and local government spending (+0.2 per cent). Federal government spending detracted (-0.1 per cent) marginally from growth,” he said.
The results will have no impact on the US Federal Reserve’s tapering decisions, according to Mr Sherwood. He said the US Federal Reserve’s main concern was the slowed rate of labour market hiring in the second half of the September quarter.
Mr Sherwood said US jobs growth over the past year had been higher than it should have been given the rate of economic growth, and therefore this slowdown could be reflecting a slowdown back to appropriate hiring levels.
Mr Sherwood said the US Federal Reserve will only have concrete signs of a sustained US recovery when it sees increased growth in employment, which will generate higher household incomes and higher demand.
“It won’t be until the December payrolls are available and can be compared to the September result that the US Fed will get clear signs on whether the US labour market recovery is improving or not,” he said.
