US Q3 growth unrevised, headwinds increasing

WASHINGTON: The US economy slowed in the third quarter as previously reported, but the pace was likely strong enough to keep growth on track to hit the Trump administration’s 3 per cent target this year, even as momentum appears to have moderated further early in the fourth quarter.
Gross domestic product increased at a 3.5 per cent annualised rate, the Commerce Department said on Wednesday in its second estimate of third-quarter GDP growth. That was unchanged from its estimate in October and well above the economy’s growth potential, which economists estimate to be about 2 per cent.
The unrevised third-quarter GDP reading reflected a faster pace of inventory accumulation and more business spending on equipment than initially thought that was offset by downward revisions to consumer spending and exports. The economy grew at a 4.2 per cent pace in the April-June quarter.
Strong growth last quarter likely keeps the Federal Reserve on course to raise interest rates in December for the fourth time this year. Fed Chairman Jerome Powell said on Wednesday he expected solid growth, low unemployment and inflation near the US central bank’s 2 per cent target.
The dollar fell against a basket of currencies on Powell’s rate comments, while US Treasury prices rose. Stocks on Wall Street rallied.
Growth is being driven by the Trump administration’s $1.5 trillion tax cut package, which has given consumer spending a jolt and supported business investment. The fiscal stimulus is part of measures adopted by the White House to boost annual growth to 3 per cent on a sustainable basis. An alternative measure of economic growth, gross domestic income (GDI), increased at a rate of 4.0 per cent in the third quarter, quickening from the second quarter’s 0.9 per cent pace.
The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 3.8 per cent rate in the July-September period, up from a 2.5 per cent growth pace in the second quarter. The income side of the growth ledger was buoyed by after-tax corporate profits, which increased at a 3.3 per cent rate last quarter after rising at a 2.1 per cent pace in the April-June period.
But dark clouds are gathering over the economic expansion that is now in its ninth year and the second longest on record. The goods trade deficit widened further in October, pressured by declining exports of soybeans, capital goods and automobiles, the Commerce Department said in another report on Wednesday. — Reuters