Economy grew at robust 3.5% in third quarter

US economy grows 3.5% in 3Q as consumers, government spending boosts GDP

While that would mark a slowdown from 4.2 percent in the second quarter, it would still well exceed the economy's growth potential, which economists put at about 2 percent. In the second quarter of 2018, real GDP increased 4.2 per cent, the Bureau of Economic Analysis said.

The U.S. economy slowed in the third quarter to a still-strong 3.5 percent annual growth rate, the Commerce Department said in its final assessment of economic health before the November congressional elections.

"The big swings in trade and inventories between the second and third quarters are likely at least partially due to changes in activity associated with trade policy", said Daniel Silver, an economist at JPMorgan in NY. Non-residential fixed investment grew at just a 0.8 percent, and the Economic Policy Institute said that such investment is growing more slowly in the first three quarters of 2018 than it did in the same period in 2017 - before the tax cuts went into effect.

The report was the Commerce Department's first of three estimates of Gross Domestic Product (GDP) growth between July and September. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 4.0 per cent rate in the third quarter.

The US economy slowed less than expected in the third quarter as a tariff-related drop in soybean exports was partially offset by the strongest consumer spending in almost a four years and a surge in inventory investment.

Since then, soybean exports have declined every month, increasing the trade deficit.

Economists had forecasted an expansion of the GDP of 3.3% during the third quarter.

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Other decreases existed for exports of nonautomotive capital goods and petroleum.

This is published unedited from the PTI feed. Robust consumer spending " Trade policy may also have driven the big swings in net exports and inventories", said Michael Feroli, an economist at JPMorgan in NY. Inventory investment is expected to have added as much 2 percentage points to GDP growth after slicing off 1.1 percentage points from output in second quarter.

Moreover, the export growth is expected to be at between 8.72 percent and 9.08 percent, and the figure will reach between 9.08 percent and 10.02 percent in 2019, as well as, the import growth at between 16.99 percent and 17.13 percent in 2018, and it will decline to between 14.04 percent and 14.88 percent in 2019.

Wall Street, which is suffering from disappointing company results, with Google and Amazon in particular, in the midst of a crisis of volatility, has ignored the growth and remained in the red on Friday. The core PCE price index rose at a 2.1 per cent pace in the April-June period. Borrowing costs also may keep rising, as investors project the Federal Reserve will raise the benchmark interest rate for a fourth time this year in December. Financier and former Obama administration official Steven Rattner highlighted the government spending factor in a tweet: "Note the resurgent contribution to growth from government spending which added 0.6-ppnts over 3Q with both defense and non-defense on the rise".

"The stock market is going to go up and down", he said.

USA consumption is being supported in part by a tightening labour market, characterised by an unemployment rate that is at a near 49-year low of 3.7%.

The struggling housing market was also a drag, falling by four per cent from the prior quarter in its sharpest fall in more than a year.

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