The latest revised GDP estimates showed that the U.S. economy advanced at an unrevised pace of 3.5% in the three months ending September. The data was the same as per the preliminary GDP estimates. Growth is seen to be on track to hit the government’s 3% GDP target rate this year.
Data from the Commerce Department showed that the U.S. GDP advanced at an annualized pace of 3.5% in the third quarter. This was an unchanged estimate from the previous estimate. However, growth was considerably weaker compared to the second quarter GDP. In the second quarter, the U.S. GDP grew 4.2%.
Data for the third quarter showed that business inventory rose faster than expected while spending on equipment also increased. However, the increases were offset by a downward revision to consumer spending and exports data.
The third quarter GDP data was in line with estimates as economists polled expected to see no revisions.
Third quarter growth was seen driven by the stimulus spending boost via the tax cuts. This gave consumer spending a boost and also propped up business investment.
Consumer spending which accounts for more than two-thirds of the U.S. economy was seen rising to 3.6% in the third quarter. This was a slight decline from the 4.0% increase seen in the previous quarter.
Imports were seen rising slightly at a faster pace in the third quarter. This acceleration comes amid the proposal of the U.S. President imposing higher tariffs on goods imported from China. Increased domestic demand was also seen contributing to the higher imports.
Inventory investment was seen adding 2.27 percentage points to the overall GDP growth, which was slightly higher compared to 2.07% added to the GDP previously. This was also the most significant increase since the fourth quarter of 2011.
The Trump administration delivered the fiscal stimulus program in an effort to maintain a 3% GDP growth target.
Reports from last week also showed that on the corporate side, after the tax cuts, corporate profits increased to 3.3% in the previous quarter. This was a modest increase from 2.1% gain seen in the previous quarter.
This comes as an alternate measure of growth called the gross domestic income, or GDI was seen rising 4.0% in the third quarter. This was a sharp acceleration from the second quarter which registered a 0.9% increase. The gross domestic output, which is the average of the two measures was seen rising 3.8% in the reported period. This marked a slight increase from 2.5% in the second quarter.
Despite the better than expected report, there is a widespread concern that growth could slow. Growth in the U.S. has been expanding for the ninth consecutive year and marks the second longest streak of expansion.
Business spending on equipment was seen weakening in the fourth quarter alongside slowing demand in the housing market.
The slowdown comes as higher interest rates were seen pushing the mortgage rates higher. Lower oil prices were also partly blamed for the upcoming slowdown. Lower fuel prices are expected to hurt investment in the energy sector due to lower profits. International crude oil prices have declined by more than 30% in the past month. This also sparks concerns of a global economic slowdown.
For the fourth quarter, estimates are pointing to a further slowdown in the economy. Q4 GDP is currently being estimated to rise around 2.5%. This would mark a second consecutive slowdown on a quarterly basis.
However, for the moment, the central bank is widely expected to deliver one more rate hike at its meeting in December. Increasing concerns from various quarters have been calling for the Fed to slow its pace of rate hikes.
Just last week, President Trump once again expressed his displeasure on the Fed.
