The US economy grew at an annualised pace of 3 per cent in the third quarter, following a 3.1 per cent gain in the second quarter, according to the Bureau of Economic Analysis. That was above economists’ estimate for growth of 2.5 per cent.
Upbeat growth data came despite the impact of hurricanes in Texas and Florida. The destruction wrought by storms tends to depress growth before boosting it later.
Consumer spending, which accounts for more than 70 per cent of the US economy, grew 2.4 per cent after a 3.3 per cent increase in the previous three months, adding 1.62 percentage point to third-quarter growth. The tightening labour market, low borrowing costs and contained inflation are expected to provide the wherewithal for households to sustain their spending.
Nonresidential fixed investment, a measure of business spending, expanded at a robust rate of 3.9 per cent as companies are upbeat about the outlook in the US and abroad. Residential investment remained a weak spot, falling 6 per cent.
Exports of goods and services rose 2.3 per cent amid improving overseas markets. Imports fell 0.8 per cent. Net exports added 0.41 percentage point to growth, while inventories added 0.73 percentage point.
Final sales to domestic purchasers – which strip out trade and inventories, the two most volatile components of the GDP calculation – climbed 1.8 per cent, the slowest pace since early 2016.
The Trump administration says that the world’s largest economy will grow at a sustained 3 per cent rate or more for years to come if the Republican-controlled Congress passes the tax cuts reform. The ability for the US to sustain such growth, however, is questionable given the country’s lacklustre productivity growth and the aging population.
Growth is steady enough to allow the Federal Reserve to raise interest rates by a quarter-point when it meets in December.
Meanwhile, core personal expenditures, excluding food and energy – the Federal Reserve’s preferred measure – rose at a 1.3 per cent annualised rate, up from 0.9 per cent in the previous quarter. That was in line with market expectations.
The first estimate of GDP, the value of all goods and services produced, will be revised twice.
Photo: Kurt Wagner
