GDP Grew More Than Predicted in the Third Quarter
The U.S. Economy has hit an impressive milestone. In the third quarter, the gross domestic product (GDP) grew by 3.3%, even with the tough hurricane season.
This is the fastest rate seen in the last three years. In 2016, the economy saw merely 1.5% growth.
“It was the first time actual gross domestic product had exceeded potential GDP since the fourth quarter of 2007, suggesting the nation’s economic resources are being used efficiently. An acceleration in growth at this point could generate overheating that produces financial excess or long-elusive consumer price pressures, writes the Wall Street Journal.
The economy started to slow back during the recession that started to hit December of 2007. In mid-2009, the GDP was 6% below the maximum sustainable level.
This is another accomplishment of the Trump administration, which also recently announced that the unemployment rate is at the lowest level it has been in the last 17 years.
“While the revised growth rate is in line with President Donald Trump’s goal, economists generally see such a pace as unsustainable and expect growth to slow sometime in 2018. Trump and congressional Republicans are pushing a tax-cut plan with the aim of lifting GDP gains to 3 percent annually, though analysts expect any economic boost to be modest, on balance, if the proposal becomes law,” writes Bloomberg Markets.
The GDP growth was anticipated to be around 3.2%, but again the economy is performing better than expected.
”It’s the sweet spot,” said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings. “We’d like to be there for some time, but let’s see how long it lasts.”
So what attributed to the growth?
Interestingly enough, consumer spending, which accounts for 70% of U.S. economic output, decreased by 1% from the second quarter and grew at a pace of 2.3%.
However, business investments increase by 7.3% from July to September. But businesses accumulated also more inventory than expected, so this could halt some growth in the fourth quarter.
Government spending and investments also increased, due to the spike in defense spending.
There are some areas in need of improvement though.
“Price data in the GDP report showed inflation remains behind the Fed’s 2 percent goal. Excluding food and energy, the central bank’s preferred price index tied to personal spending rose at a 1.4 percent annualized rate last quarter, revised from 1.3 percent and following a second-quarter gain of 0.9 percent,” writes Bloomberg Market.
But the fed chair Janet Yellen expects the economy to only improve.
On Wednesday, Yellen said “the economic expansion is increasingly broad-based across sectors,” and that “the economy will continue to expand” while addressing lawmakers.
Forecasters at Macroeconomic Advisers are predicting 2.5% GDP growth for the next quarter.
Author’s note: This is what we hoped for when Trump was elected. There might be a minor downturn soon, but with Trump’s tax plans, it’s likely the growth will only continue.
Editor’s note: This will be the first year since before Obama to be greater than 3% for the whole year.