The US economy grew faster than originally reported in the July to September period and prices remain tame, but amid the unresolved trade dispute with China economists and businesses note some worrying issues persist.
Higher exports and residential investment helped boost growth to a 2.1 percent annual rate from the 1.9 percent estimated last month for the third quarter, according to the more complete data the US Department of Commerce released on Wednesday.
However, economists note the apparent good news on the economy is tempered by some concerning elements, reflected once again in a nationwide survey by the US Federal Reserve, showing continued concerns about the impact of tariffs and trade tensions.
Business investment, which has been hit hard by US President Donald Trump’s trade dispute with China, has declined sharply, but since it dropped by less than originally reported, falling 2.7 percent rather than 3 percent in the first estimate, that smaller decline helped growth.
Meanwhile, businesses building up their inventories of products added nearly 0.2 points to the GDP calculation, according to the revised data.
While that could be due to companies stockpiling ahead of announced tariffs, it could also reflect slowing consumption.
“In short, slightly stronger than before, but mainly because of inventories. That data continue to show growth slowing, but not dramatically,” said economist Jim O’Sullivan of High Frequency Economics in Valhalla, New York.
The consensus among economists predicted no revision to the GDP result.
Some correctly forecast the upward revision, which puts the third quarter on track to best the 2 percent growth in the second quarter, after the 3.1 percent expansion in the first three months of the year.
Consumption, the traditional driver of growth, accounting for 70 percent of US GDP, increased 2.9 percent, with a strong gain in spending on durable goods such as vehicles and appliances, according to the data.
However, that is a much smaller increase than the prior quarter.
Investment in real-estate market jumped 5.1 percent, the strongest in two years, boosted by low interest rates.
Exports, which fell 5.7 percent at the height of the trade dispute in the second quarter, recovered slightly in the latest quarter, rising 0.9 percent — two-tenths stronger than originally reported, while imports also were stronger than estimated, rising by 0.8 percent.
However, the Fed’s “Beige Book” survey of businesses, farmers and bankers showed the continued negative impact of trade tensions and tariffs, with most of the 12 regions showing only slight growth.
Amid the deluge of data ahead of yesterday’s Thanksgiving holiday, another report showed the Fed’s preferred inflation measure — the PCE price index — held steady at a low 1.3 percent last month remaining well below the Fed’s 2 percent inflation goal.
Excluding volatile food and energy prices, the “core” PCE inflation index slowed slightly from 1.7 percent in the prior month to 1.6 percent.
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