It’s nice that the U.S. economy grew faster than expected in the third quarter, for the best half-year performance since 2003. But the payback will probably be weaker growth in the fourth quarter, according to Michael Feroli, the chief U.S. economist at JPMorgan Chase. He lowered his outlook for fourth-quarter growth to 2.5 percent annualized from 3 percent, after third-quarter growth came in at 3.5 percent instead of a projected 3 percent.
Some of the unexpectedly strong production wound up unsold on shelves, which could be inducing companies to produce a bit less in October through December to get inventories back where they want them. “The upside surprise was mostly located in defense spending, inventories and, to a lesser extent, net foreign trade. All three of these categories tend to be associated with payback the following quarter,” Feroli wrote on Thursday in a note to clients.