U.S. GDP Data Shows Better Growth Numbers Than Earlier Predicted in the 3rd Quarter

The U.S. economy has expanded by 2.9% in the third quarter as per a recently released report. According to the U.S. Department of Commerce’s report which was released last Friday, growth has been pegged at a seasonally adjusted annual rate of 2.9%. It has beaten market expectations which were closer to 2.5% and marked the strongest quarterly advance in the American economy in the last two years.

The quarterly GDP data presented by the Commerce Department and the monthly unemployment data to be released on November 4th will be strong indicators that provide a sense of the overall performance of the economy before the nation goes to polls on November 8th to elect the next President. Experts are optimistic after seeing the latest results because there has been a broad-based growth in the third quarter and almost all the industries have advanced. For the second straight quarter, trade has been a net positive and has contributed a full point to growth on the back of a big jump in exports and lowering of imports.

A steep fall in consumer spending in the third quarter

Although the third quarter consumer spending data is tepid compared to the robust growth in the second quarter which had seen a growth of 4.3%, the sentiment is largely positive although it has slowed down to 2.1% annual growth rate. Despite consumer spending on consumer durables remaining strong, there has been a fall in the level of expenditure on services and there has been a steep fall in non-durable spending.

There is a shadow of a slowdown in the residential construction business but most retail stores are upbeat and are restocking their shelves ahead of the holiday season. With improvement in global energy prices, it is also believed that spending in the energy sector and drilling business would improve and add to the economy in the coming quarters although rise in the price of gas could prove to be a damp squib for the retail consumer. It was also pointed out that consumer sentiments are often less than optimistic in election years and 2016 has seen a repeat of the past trend. However, a strong macroeconomic turnaround and less than anticipated damage of Brexit and other global crises to the U.S. economy thus far has allowed it to position for a better performance than in the last few years.

Mood in the two camps

While the Democratic Presidential Candidate Hillary Clinton and her team pointed out to the fact that the country is seeing a turnaround in economy under the Democratic Presidential dispensation, her Republican counterpart was less than effusive and dubbed the figures as dismal. While growth of 3-4% seen in the late 1990s may still be out of the question, there are definite signs that the economy is improving and with the Presidential Elections around, the Fed is expected to stay away from monetary policy tightening and may even consider hiking the interest rates when it meet next December.      

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