US Government Keeps Third-Quarter Growth Unchanged At 3.5 Percent

Despite the slowdown of the US economy for the third quarter as had been previously shown in government data, analysts believe that the growth rate achieved in this period should be strong enough for the US economy to achieve the 3 per cent growth target that had been set for the year by the Trump administration. However, it appears that the growth rate had moderated further in the first part of the fourth quarter.

The Commerce Department said that there was a growth of 3.5 per cent in the gross domestic product while releasing the second estimate of third-quarter GDP growth. That number was the same as was announced in the estimate in October and was more than the economy’s growth potential which has been predicted to be about 2 per cent.

The growth rate of the economy in the second quarter was 4.2 per cent. A revised downward pressure on consumer spending and exports offset the gains made in the industry spending more on equipment and as businesses accumulated inventory at a faster pace as per the revised data.

Consumer spending was given a jolt and business investment was supported by the White House’s $1.5 trillion tax cut package which has driven growth. That fiscal measure was a part of US president Donald Trump’s strategy to boost growth to reach 3 per cent annually on a sustainable basis.

After rising at a 2.1 percent pace in the second quarter, after-tax corporate profits increased at a 3.3 percent rate last quarter according to data from the government.

Compared to the growth rate of 0.9 per cent in the second quarter, the gross domestic income (GDI) increased at a rate of 4.0 percent in the third quarter. the GDI is a an alternative parameter for measuring economic growth.

There was also better performance on the gross domestic output or the average of GDP and GDI, in the July-to-September period with a growth rate of 3.8 per cent compared to the same figure growing at 2.5 per cent in the second quarter.

However many see some future hiccups in the US economic growth which is in the ninth straight year of expansion and is the second longest ever. The Commerce Department said in another report that in October, the trade deficit in goods increased because of reducing exports of soybeans, capital goods and automobiles.

There was also weakening of business spending on equipment weakening for October according to data released last week and is tipped to slow down more because of Brent crude oil price dropping by over 30 per cent compared to highs of more than $86 recorded in early October. Fear of reduced profits results in lower investments in the energy sector when oil prices are low.

Many also believe that the good third quarter results would spur the Federal Reserve to continue with its strategy of increasing rates of interest as expected in December – which would mark the forth increase this year.

(Adapted from NYTimes.com)

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