Imports increase as American GDP meets 2% forecast

American GDP growth was an annualised 2% in the third quarter, meeting median economist’s predictions despite rising imports.

The American Bureau of Economic Analysis said the increase “primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, non-residential fixed investment, federal government spending, and exports that were partly offset by a negative contribution from residential fixed investment”.

However, the bureau said imports increased over the third quarter, contradicting the government’s attempts to increase exports and rebalance the economy.

The number, which follows an average growth of 2.7% in the first half of the year, precedes the Federal Open Market Committee’s (FOMC’s) meeting next week.

The FOMC is expected to predict the recovery is weak enough to warrant a second round of quantitative easing, despite the fact that growth is not dipping to near-zero levels. (article continues below)

However, inflation in America remains very low and employment stubbornly high, putting pressure on the FOMC to act in the absence of fiscal measures.

President Barack Obama is due to make the case for a new tax deduction which would enable companies to write off all equipment purchases in the first year, as opposed to deferring them over a number of years.

The move is designed to encourage companies to grow and hire workers.

However, tax deductions on equipment could cost the government tens of billions of dollars in upfront tax at a time of huge budget deficits.

It could also encourage companies to create new automated production lines, rather than hiring extra workers.