US economic growth topped market expectations in the third quarter of 2012 despite a sluggish foreign trade environment.

Third-quarter gross domestic product (GDP) grew at an annualised rate of 2%, better than the previous quarter's reading of a 1.3% increase, according to the US Bureau of Economic Analysis.

The figure topped the market consensus estimate of a 1.9% expansion.

Real GDP growth was mostly on the back of positive consumer spending, federal government spending, and fixed residential asset investments. These items made up for the negative contribution from exports, non-residential private investment, and inventory investment.

Looking at the GDP components on the demand side: consumption rose 2% compared with a previous increase of 1.5%; investment gained 0.5% (previous: +0.7%); Federal government spending increased 9.6% (previous: -0.2%); state and local spending fell 0.1% (previous: -1.0%); exports dropped 1.6% (previous: +5.3%); while imports fell 0.1% (previous: -1.0%)

The GDP deflator, which is an important inflation indicator, was 2.9% compared to 1.5% in the previous quarter.

Analysts at Digital Look labelled the data as "upbeat" as it was a result of rising domestic demand thanks to consumer spending and to a lesser extent investments.

"The negative side is that foreign trade appears to be slowing down due to slowing global growth and the European debt crisis. Net exports did not contribute to growth," they said.

"The GDP deflator also stands out. It appears that the Federal Reserve is being successful in heating up the economy. However, we should be cautious with this data because it is still subject to two revisions."

The first revision will be released on November 29th.

FM

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