The U.S. economy expanded at a reduced rate in the third quarter as businesses cut back on restocking warehouses to reduce swollen inventories. The drag from inventory, however, is unlikely to persist, and economists anticipate growth will pick up in the fourth quarter.
"Demand from U.S. consumers, businesses and governments remains solid, as does demand for U.S.-produced goods and services, both domestically and from abroad," Stuart Hoffman, chief economist at PNC Financial Services, wrote in a research note.
Gross domestic product increased at a 1.5 percent annual rate, the Commerce Department reported on Thursday. Taking inventories out of the equation, the economy grew 3 percent, after growing 3.9 percent the prior three months.
"The basic story continues to be one of modest growth with very little inflation," wrote Dean Baker, an economist and co-director of the Center for Economic and Policy Research, a nonpartisan think tank.
Companies collected $56.8 billion worth of inventory in the third quarter, the smallest since early last year and markedly off from $113.5 billion in the second quarter.
"After large builds in Q1 and Q2, the change in inventories was the slowest since Q1 '14 and is the main reason for the softness in growth," noted Peter Boockvar, chief market strategist at the Lindsey Group.
The U.S. economy increased at an average 2.3 percent in the first two quarters of 2015 as the second-quarter surge made up the ground lost in the first quarter, when growth was curtailed by winter weather, a port strike on the West Coast and cutbacks in the oil sector.
Thursday's estimate is the first of three for the quarter -- the government will update its read on growth next month and in December.
The Federal Reserve on Wednesday said the economy was growing at a "moderate" pace and put a December rate hike in play.
Separately, data from the Labor Department on Thursday had the number of those filing for jobless benefits holding near four-decade lows, with claims rising by 1,000 to 260,000 last week.