United States economy grows more than expected in Q3

Alicia Cross
October 28, 2017

It was the strongest two-quarter showing since back-to-back gains of 4.6 percent and 5.2 percent in the second and third quarters of 2014, the government said. This added a 0.41 percentage point to GDP growth. The administration was quick to hail the GDP report as evidence that Trump's economic program was already helping to lift the economy.

The skepticism about Trump's 3 percent was somewhat justified.

U.S. Travel said that numerous hurricane-related job losses were due to employees being off payrolls or otherwise unable to work during the storms because they had evacuated or because their establishments were not open for business due to power failures and other effects of the hurricanes. He suggest that if the Trump administration manages to shepherd at least a modest tax cut measure through Congress, growth in 2018 could accelerate to 2.5 percent.

Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the third quarter of 2017 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis.

Economists thought that was as good as things could get. Economists had forecast that the fallout from the storms would slow growth to an annualized pace of 2.5 percent.

While the second quarter had proved embarrassing for the economics profession, economists were confident that this was an anomaly.

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The economy managed to expand at a healthy rate last quarter despite the damage inflicted by Hurricanes Harvey and Irma, which many economists think shaved at least one-half of 1 percentage point off annual growth in the July-September period.President Donald Trump has pledged to accelerate growth from the tepid 2.2 percent annual averages that prevailed since the recession ended in 2009.

Economists warned that estimates of business inventories, a major factor in the GDP rise, can vary significantly quarter-to-quarter.

On Friday, however, the Commerce Department said the economy grew at a seasonally adjusted 3 percent in the third quarter. Businesses went a bit MAGA, building up inventory in anticipation of strong demand. The gain was driven by spending on durable goods that rose 8.3 percent.

Exports grew at a 2.3 percent rate for the third quarter and imports decreased at a 0.8 percent pace resulting in a reduced trade shortage. Government investment fell for the third straight quarter, which means more of the growth is coming from the private sector.

"For example, oil and gas extraction and petroleum and petrochemical production in Texas and agricultural production in Florida were impacted", stated the report. But those declines may very well reverse in the fourth quarter as the rebuilding starts hitting the economic tape.

But economists did not expect such growth so far above 2 percent.

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