U.S. Economy roars back: +2.9% in third Quarter

U.S. Economy roars back:  +2.9% in third Quarter

U.S. economic growth accelerated last quarter, easing fears of a near-term slowdown but doing little to change the trajectory of a long but weak expansion

Gross domestic product, a broad measure of goods and services produced across the economy, expanded at an inflation- and seasonally adjusted 2.9 % annual rate in the third quarter, the Commerce Department said Friday. That was stronger growth than the second quarter’s pace of 1.4 %. Economists surveyed by The Wall Street Journal expected growth at a 2.5 % pace for the July-to-September period.

Last quarter’s growth rate was the fastest recorded in two years.

US Eco

The third-quarter acceleration largely reflected increased exports and a build-up of inventories, while consumer spending increased at a slower rate.

The latest data “do not point towards a new growth path but rather a strong rebound following one year of soggy growth,” said Joseph Brusuelas, chief economist at consulting firm RSM US.

The data of October 28, 2016 also gave voters their last comprehensive look at the economy’s health before the November election.

The third-quarter GDP report showed consumer-spending gains slowed after a strong advance this spring. Personal-consumption expenditures rose at a 2.1 % pace in the third quarter compared with a 4.3 % gain during the prior period. Spending on long-lasting durable goods such as cars and appliances rose grew at better than 9 % in the past two quarters. Consumer spending accounts for about two-thirds of total output.

Exports, which add to GDP, increased at a 10 % rate in the third quarter, the best gain in nearly three years. Export gains had slumped over the prior year and half, in part because a stronger dollar made U.S. up for more expensive goods overseas. But separate data suggested that shipments of agricultural products, especially soybeans, supported the latest gain.

Imports, which subtract from domestic output, increased at a 2.3 % rate. In total, trade contributed 0.83 percentage point to overall growth.

The change in private inventories, a drag on output the five previous quarters, contributed 0.61 percentage point to the overall growth rate in the third quarter. An increase in stockpiles could indicate businesses are more confident in future demand.

A measure of economic growth that excludes inventory effects, real final sales of domestic product, rose at a 2.3 % pace in the third quarter, a slight slowdown compared with a 2.6 % increase in the second quarter.

A measure of business spending, non-residential fixed investment, rose at a 1.2 % rate versus the prior quarter’s 1 % advance. Firms increased spending on building structures, but reduced outlays on equipment for the fourth straight quarter. Spending on intellectual property, including research and development and software, advanced at a slower pace than in the prior quarter.

Rapid sales growth at Proto Labs Inc. slowed over the past year, particularly for clients tied to industrial equipment and commodities, said Chief Executive Officer Vicki Holt. The Maple Plain, Minn., manufacturer uses 3-D printing to create prototypes. “There’s just some cautiousness that I feel in the environment,” she said. “An increased number of customers tell us the reason they haven’t bought yet is because projects have been delayed or cancelled.”

Spending on home building and improvements fell for the second straight quarter. Residential fixed investment declined at a 6.2 % pace in the third quarter. Until this spring, residential investment had been a driver of economic growth since mid-2014.

Government spending advanced at a 0.5 % rate last quarter, with stronger federal spending offsetting a decline at the state and local level.

The latest data suggests the economy this year isn’t likely to top 2015’s 2.6 % growth rate, the best annual reading of the expansion. The economy has failed to grow better than a 3% in any year since 2005, and many economists expect such growth will remain a rarity. The nonpartisan Congressional Budget Office projects GDP to grow at around 2 % annually through 2026. Federal Reserve policy makers have pegged longer-run output gains at a 1.8 % annual rate.


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