U.S. GDP report shows economy grew at a slower pace

Adjust Comment Print

Although the pace of the expansion has stalled, and the president has proclaimed this summer to be able to do cavort the economy at a rate of 5%, the performance of the 3rd quarter keeps the promises of the presidential campaign.

As the chart below shows, the Congressional Budget Office estimated the USA economy would grow 3.3 percent this year. During the past 4 quarters, GDP has grown 3.0 percent.

The US economy, as measured by gross domestic product (GDP), expanded by an annualised rate of 3.5 per cent in the third quarter, according to an initial reading from the US commerce department.

"The big swings in trade and inventories between the second and third quarters are likely at least partially due to changes in activity associated with trade policy", said Daniel Silver, an economist at JPMorgan in NY. The American economy looks like it will expand above a 3% rate in 2018.

The annualized rate of gains in gross domestic product compared with the 3.3% median estimate in a Bloomberg survey and followed a 4.2% advance in the prior three months, according to the October 26 report from the Commerce Department.

In addition, real consumer spending grew four per cent at an annual rate in the third quarter, substantially up from the 2.6 per cent pace during the preceding four quarters, it said.

Consumer spending rose 4% in the third quarter, even stronger than the three months before, offset by a slowdown in business and residential investment.

The GDP report Friday was the government's first of three reviews of overall economic activity for the July-September period.

"The American consumer continues to be the hero of the economy, with the 3.5 percent GDP beating estimates, supported by a healthy increase in disposable personal income", Robert Frick, corporate economist at Navy Federal Credit Union, told ConsumerAffairs. Trump's trade war with China is set to escalate in January, when tariffs on about half of all imports from China jump from 10% to 25%.

This is published unedited from the PTI feed.

The economy is underpinned by a $1.5 trillion tax cut and increased government spending. Imports are a drag on GDP growth.

Wall Street, which is suffering from disappointing company results, with Google and Amazon in particular, in the midst of a crisis of volatility, has ignored the growth and remained in the red on Friday. The two quarters marked the strongest consecutive quarters of growth since 2014.

"We were told we'd get 3 percent growth", he said, adding, "That's more than double the growth rate that President Trump inherited".

The Fed raised rates in September for the third time this year and removed a reference to monetary policy remaining "accommodative" from its policy statement.

On the other hand, the Trump administration is optimistic, particularly as the report showed inflation remains contained: Excluding food and energy, the Fed's preferred price index also rose at a 1.6 percent rate. Financier and former Obama administration official Steven Rattner highlighted the government spending factor in a tweet: "Note the resurgent contribution to growth from government spending which added 0.6-ppnts over 3Q with both defense and non-defense on the rise".

On Friday, October 26, the US stock market fell again. "Plus the lowest unemployment rate in 49 years!" Business investment, which had surged at an 8.7 per cent rage in the second quarter, slowed to a small 0.8 per cent gain the third quarter.