The American economy expanded at a healthy 2.8 percent annual pace from July through September on strong consumer spending and a surge in exports, the US government said yesterday, leaving unchanged its initial estimate of third-quarter growth.
GDP slowed from the April-July rate of 3 percent, the US Department of Commerce reported.
But the world's largest economy is proving surprisingly durable as GDP growth has topped 2 percent for eight of the last nine quarters.
Photo: Frederic J. Brown, AFP
Within the GDP data, a category that measures the economy’s underlying strength rose at a solid 3.2 percent annual rate from July through September, up from 2.7 percent in the April-June quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Consumer spending, which accounts for about 70 percent of US economic activity, accelerated to a 3.5 percent annual pace last quarter, up from 2.8 percent the previous quarter and marking the fastest growth since the fourth quarter of last year.
Exports also contributed to the third quarter’s growth, increasing at a 7.5 percent rate, the most in two years. Still, the third-quarter growth in both consumer spending and exports was lower than the commerce department initially estimated.
Growth in business investment slowed sharply on a drop in investment in housing and in nonresidential buildings such as offices and warehouses. By contrast, spending on equipment surged.
When he takes office next month, US president-elect Donald Trump will inherit an economy that looks broadly healthy.
Growth is steady. Unemployment is low at 4.1 percent. Inflation has fallen to 2.6 percent. That is still above the US Federal Reserve's 2 percent target, but the central bank felt satisfied enough with the progress against inflation to cut its benchmark interest rate in September and again this month. Most Wall Street traders expect the Fed to cut rates again next month.
Yesterday’s report also contained some encouraging news on inflation. The Fed’s favored inflation gauge — the personal consumption expenditures (PCE) index — rose at just a 1.5 percent annual pace last quarter, down from 2.5 percent in the second quarter. Excluding volatile food and energy prices, so-called core PCE inflation was 2.1 percent, down from 2.8 percent in the April-June quarter.
Trump has promised an economic shakeup. On Monday, for example, he vowed to slap new import taxes on goods from China, Mexico and Canada. Mainstream economists view such taxes — or tariffs — as inflationary. That is because they are paid by US importers, who then seek to pass along the higher costs to their customers.
Yesterday's report was the second of three looks at third-quarter GDP. The commerce department will issue the final report on Dec. 19.
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