Coverage: The economy is growing faster than expected
The U.S. economy grew at a 3.2 percent clip during the third quarter, the Commerce Department announced Tuesday, outpacing the 3.0 percent growth rate that economists expected.
Lucia Mutikani of Reuters had the news:
Growth was the strongest since the third quarter of 2014 and followed the second quarter’s anemic 1.4 percent pace. Output was lifted by upward revisions to business investment and home building.
Exports grew at their quickest pace since the fourth quarter of 2013, driven by a surge in soybean exports after a poor soy harvest in Argentina and Brazil. International trade contributed 0.87 percentage point to GDP growth and not 0.83 percentage point as reported last month.
Data ranging from housing to retail sales and manufacturing output also suggest the economy retained its momentum early in the fourth quarter even as exports appear to be faltering amid a reversal of the boost to growth provided by soybean exports in the third quarter.
The Atlanta Fed is currently forecasting GDP rising at a 3.6 percent rate in the fourth quarter, supporting market expectations that the Federal Reserve will raise interest rates next month.
Economic growth could also be supported next year if President-elect Donald Trump succeeds in pushing through Congress a fiscal stimulus plan that includes massive infrastructure spending and tax cuts, analysts said.
Michelle Jamrisko of Bloomberg noted the growth in consumer spending:
The revised growth figure mainly reflected changes to the pace of consumer spending and residential investment. Household purchases, which account for almost 70 percent of the economy, grew at a 2.8 percent annualized rate, stronger than the 2.1 percent pace initially estimated.
The adjustment reflected data from the Alcohol and Tobacco Tax and Trade Bureau, as well as figures on monthly retail sales, motor vehicle registrations and electricity usage, according to the Commerce Department.
Consumers also had more spending power in the three-month period than previously thought. Wages and salaries were up $110.2 billion from the second quarter, after an initial estimate of a $94.6 billion gain.
Another report on Tuesday signaled momentum in household spending this quarter. The Conference Board’s consumer confidence index rose to 107.1 in November, the highest level in more than nine years, from 100.8 in October.
Andrea Riquier of MarketWatch.com reported that business investment also contributed to the growth:
Another big contribution to the economy was business investment in structures like offices and factories, which expanded at a 10.1% pace, faster than the initial estimate of a 5.4% clip.
Corporate profits soared 6.6% in the third quarter, a much better performance than the 0.6% decline in the second. After-tax profits rose 7.6% from the second quarter, noted Morgan Stanley economist Ted Wieseman, following a 13.3% tumble over the preceding six quarters, one of the biggest declines in decades.
Residential investment, which has run at a much weaker pace than economists expected based on other economic indicators, like housing starts, contracted 4.4% in the second revision. That is better than the 6.2% decline initially reported.
Exports were marked up slightly, to a 10.1% gain from 10.0%, largely thanks to a surge in soybean exports. Exports of goods are at the strongest in three years. Imports, which detract from overall GDP growth, were marked down slightly, to a 2.1% gain from 2.3%.
Given the quirks involved in GDP calculations, some economists prefer to track gross domestic income. That measure was up 5.2% in the third quarter, the government said.