Friday, 16 November, 2018


USA economy grew at strong 3.5 per cent rate in Q3

Soybeans are offloaded from a combine as a farmer harvests crops in Indiana Modal Trigger Soybeans are offloaded from a combine as a farmer harvests crops in Indiana. AP
Conrad Doyle | 30 October, 2018, 12:29

Consumer spending, which accounts for more than two-thirds of total economic output, rose at a 4.0% annual rate in the third quarter, the strongest rate of growth in almost four years.

Trump has promised to achieve annual growth rates of 3 per cent, in part through a sweeping tax overhaul he signed into law last December that lowers levies on U.S. corporations and - to a lesser extent - many ordinary Americans.

While that would mark a slowdown from 4.2 percent in the second quarter, it would still well exceed the economy's growth potential, which economists put at about 2 percent. "This is what happens when we pass policies to help American consumers, workers, and businesses generate economic growth and opportunity". However, there were some red flags to the expansion of the economy that is now in a ninth straight year, which is the second longest ever recorded.

The GDP report along with next week's unemployment report for October are the last major looks at the economy before voters go to the polls in the mid-term elections.

Net exports also declined from a surge last quarter as manufacturers and farmers rushed to sell their goods overseas in advance of expected retaliatory tariffs from China.

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

The US economy grew at an annualised rate of 3.5% in the third quarter of the year, official figures have shown.

However, the drag from trade was probably offset by faster inventory accumulation by businesses stockpiling before USA import duties, on mostly in Chinese goods, came into effect.

Inflation as measured by the Personal Consumption and Expenditure price index, meanwhile, rose at a 1.6% annual rate in the third quarter, down from a 2% rate in the prior quarter.

But some economists worry that the delayed effects of tariffs and higher interest rates will choke off growth starting next year.

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.

The US economy grew at an annualized rate of 3.5% in the third quarter, the government said Friday. "The strength in real PCE in Q2 (3.8%) and Q3 likely reflects, at least in part, the boost to real disposable income that was delivered by reductions in personal income tax rates earlier this year".

Business spending stalled and residential investment declined for a third straight quarter, signs that the boost from a $1.5 trillion tax cut was fading and higher interest rates were hurting the housing market. But headwinds are building. The third-quarter increase was broad-based and led by wholesale trade, particularly farm products, and manufacturing, according to the Commerce Department.

Excluding the volatile trade and inventories components of GDP, final sales to domestic purchasers increased at a 3.1% pace, slowing from 4%. Imports are a drag on GDP growth. Nonresidential fixed investment-reflecting spending on commercial construction, equipment and intellectual property products such as software-rose only 0.8% in the third quarter after rising at a 8.7% rate in the second quarter and 11.5% in the first.

"The stock market is going to go up and down", he said.

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