The Economy

GDP Posts Fastest Growth in Two Years in Q3

Consumer spending, however, was relatively weak in November, suggesting a slowdown in economic growth in the fourth quarter.
Matthew HellerDecember 23, 2016
GDP Posts Fastest Growth in Two Years in Q3

The U.S. economy grew faster than initially thought in the third quarter though economists are anticipating a slowdown in the final quarter of the year.

Gross domestic product increased at a 3.5% annual rate instead of the previously reported 3.2% pace, the Commerce Department said in its third GDP estimate on Thursday.

Economists polled by Reuters had expected that third-quarter GDP growth would be revised up to a 3.3% rate. The highest growth rate in two years was driven in part by solid consumer spending and a jump in soybean exports.

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Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.0% rate in the third quarter, an upward revision from the 2.8% pace reported last month.

But that was still a slowdown from the second quarter’s robust 4.3% pace. The Commerce Department also reported Thursday that spending rose only 0.2% in November after increasing 0.4% in October.

“The fourth quarter is coming in soft,” Ryan Sweet, a senior economist at Moody’s Analytics, told Reuters. “The economy is going to end the year on a disappointing note, but we should see growth accelerate in the first half of 2017.”

Personal income was flat last month as wages and salaries fell 0.1% in November after increasing 0.5% in October. With consumer spending outpacing incomes, savings fell to their lowest level since May 2015.

But according to Reuters, “While consumer spending might be cooling, business investment is perking up after a prolonged slump.”

In a third report, the Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.9% last month after an unrevised 0.2% gain in October.

The gain suggests some of the oil-related drag on manufacturing is starting to fade amid a pickup in Gas and oil well drilling over the past several months, Reuters said.

Economists had forecast so-called core capital goods rising 0.3% in November.

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