Sun, Oct 30, 2016 - Page 16 News List

US economy surges on soybean exports

BACK ON TRACK?The US labor market is near full employment and price pressures have been increasing steadily, raising hopes that inflation might reach the Fed’s 2% target

Reuters, WASHINGTON

The US economy grew at its fastest pace in two years in the third quarter as a surge in soybean exports and a rebound in inventory investment offset a slowdown in consumer spending.

GDP increased by 2.9 percent year-on-year after rising at a 1.4 percent pace in the second quarter, the US Department of Commerce said on Friday.

That growth rate was the strongest since the third quarter of 2014 and beat economists’ expectations of a 2.5 percent expansion pace. Business investment improved the quarter, although spending on equipment remained weak.

However, with exports and inventories accounting for almost half of the increase in output, economists warned the growth spurt would likely be temporary.

Still, the data helped dispel any lingering fears the economy was at risk of stalling. In the first half, growth averaged only 1.1 percent.

“While the economy may not be ready to take off, today’s GDP suggests the economic expansion is not at risk of ending,” said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management in Baltimore.

Coming ahead of a US Federal Reserve policy meeting next week, economists said the data was unlikely to change views that the US central bank would wait until December, after the Nov. 8 presidential election, to raise interest rates.

The US labor market is near full employment and price pressures have been increasing steadily, raising confidence that inflation will gradually move toward the Fed’s 2 percent target.

Consumer spending, which accounts for more than two-thirds of US economic activity, supported the economy in the third quarter by increasing at a 2.1 percent rate, but was down from the second quarter’s robust 4.3 percent pace.

With a tightening labor market generating steady increases in wages, spending could accelerate in the fourth quarter.

Data on Friday from the US Department of Labor showed worker compensation rose 0.6 percent in the third quarter after a similar gain in the second quarter, leaving the year-on-year gain at 2.3 percent.

However, a third report showed consumer sentiment fell this month.

Less than two weeks before the election, the GDP report was seen as bolstering Democratic US presidential candidate Hillary Rodham Clinton, who has positioned herself as the best candidate to continue the more than six years of growth under US President Barack Obama.

“This is good news for the Clinton campaign, which has tied itself closely to the Obama administration’s record on the economy,” Boston College economics professor Robert Murphy said.

Clinton’s campaign team welcomed the growth pick-up and warned that policies proposed by Republican US presidential candidate Donald Trump “would take us backwards.”

Trump’s campaign team described the growth numbers as “dismal” and said they underscored the need for change.

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