USA: Stronger Than Expected Economic Growth to 3.5%

Economic growth in the US rose more than expected in the third quarter, according to the first estimate of Commerce published Thursday

US gross domestic product (GDP) grew by 3.5% on an annualized basis from July to September, while analysts had forecast a growth of 3%.

However, this represents a slowdown from the second quarter. From April to June, GDP had gained 4.6% after the contraction (-2.1%) from the beginning of the year due to harsh winter conditions.

The stronger than expected Q3 growth reflects the strong performance of exports, non-residential investment and, to a lesser extent, consumption. Public spending, a significant increase, especially in the defence sector, also contributed to the increase in activity.

Imports, which are subtracted from GDP has declined further, taking off point less growth.

The expansion of the third quarter, however, did not match the pace of the previous quarter due to a smaller increase in consumer spending, a decline in inventory accumulation and a slowdown in residential investment .

Consumer spending, which accounts for two thirds of the US GDP, grew by only 1.8% in the third quarter after gaining 2.5% in the previous quarter. They thus provide 1.22 points to growth. Consumers particularly invested in purchases of durable goods (a life of more than three years) rose 7.2%.

Exports of goods and services gained 7.8% while public spending showed an increase of 4.6%, the highest since the second quarter of 2009. The expenses of the defense sector were up 16%.

Imports declined 1.7%. It shows that the trade balance contributed 1.32 points to growth in the quarter, its best performance since the second quarter of 2009.

Companies have continued to invest in non-residential investment rising by 5.5% after the 9.7% jump in the previous quarter. The increase in residential investment slowed however, earning a modest 1.8% against 8.8% three months before. It accounted for only 0.06 point in the growth.

Movements in inventories subtracted 0.57 points to growth. Final demand for domestic products, which excludes changes in stocks, was up 4.2% against a 3.2% improvement in the second quarter.

The government will release a second estimate of growth on November 25.

User Rating: 5.0 (1 votes)