WASHINGTON: US economic growth nudged up in the third quarter and the economy appears to have maintained the moderate pace of expansion as the year ended, supported by a strong labour market.
Other data showed consumer spending increased solidly in November, adding to a string of upbeat data that have helped to quell recession fears which gripped financial markets in the summer.
The longest expansion in history, now in its 11th year, remains on track thanks to the Federal Reserve cutting interest rates three times this year. The US central bank last week kept rates steady and signalled borrowing costs could remain unchanged at least through 2020.
Though growth has been relatively strong, economists did not expect the economy to achieve the Trump administration’s 3.0 per cent target this year. Still, the resilient economy could offer some respite for President Donald Trump who was impeached on charges of abusing his office on Wednesday by the Democratic-led House of Representatives.
“The data will comfort the Fed that the economy is in ‘a good place’ and monetary policy is ‘appropriate’,” said Gregory Daco, chief US economist at Oxford Economics in New York.
Gross domestic product increased at a 2.1 per cent annualised rate, the Commerce Department said in its third estimate of third-quarter GDP. That was unrevised from November’s estimate. The economy grew at a 2.0 per cent pace in the April-June period.
Despite the unrevised estimate, which was in line with economists’ expectations, consumer spending was stronger than previously reported in the third quarter.
There were also upgrades to business spending on nonresidential structures such as power infrastructure, which limited the drop in overall business investment. That offset downward revisions to investment in homebuilding and inventory accumulation. Imports, which are a drag to GDP growth, were higher than previously estimated.
Growth estimates for the fourth quarter range from as low as a 1.5 per cent rate to as high as a 2.3 per cent pace. Growth has slowed from the 3.1 per cent rate notched in the first three months of the year in part because of the 17-month trade war between the United States and China and the fading stimulus from last year’s $1.5 trillion tax cut package.
When measured from the income side, the economy grew at a 2.1 per cent rate in the last quarter, rather than the 2.4 per cent pace estimated in November. Gross domestic income (GDI) increased at a rate of 0.9 per cent in the second quarter.
The revision to the income side of the growth ledger reflected a downgrade to corporate profits.
After-tax profits without inventory valuation and capital consumption adjustment, which corresponds to S&P 500 profits, were revised down to show them declining $23.1 billion, or at a rate of 1.2 per cent. Profits were previously reported to have decreased $11.3 billion, or at a rate of 0.6 per cent in the third quarter.
They were in part held down by legal settlements with Facebook and Google. Profits increased at a 3.3 per cent rate in the second quarter. The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, also increased at a 2.1 per cent rate in the July-September period.
The data boosted the dollar against a basket of currencies, while US Treasury prices fell. Stocks on Wall Street were treading higher, pushing key indexes to new record highs.
— Reuters
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