United States economy grows 3.5% in third quarter

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

The US economy grew at a robust annual rate of 3.5 per cent in the third quarter of 2018, a latest official estimate said Friday. "Also, the savings rate is still good, which shows people are balancing their spending with smart savings".

"Today's 3.5 percent GDP print slightly beat estimates and, similarly to the 4.2 percent Q2 print, this is because still-easy monetary conditions were mixed with a heavy dose of fiscal stimulus", said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors.

Inventories increased at a $76.3 billion rate after declining at a $36.8 billion pace in the second quarter.

The report said the inflation will remain under control this year and next.

According to the report, from the third quarter of 2018, with downward pressure on economic growth, the country's GDP growth will stay between 6.58 percent and 6.64 percent, a decrease of 0.26 percentage points to 0.32 percentage points over the previous year, and the GDP growth will slip to between 6.42 percent and 6.48 percent in 2019. For investment to fall at a time when the economy is booming and corporations are flush with cash from the big corporate tax cuts that went into effect this year is a sign that businesses don't think that the good times will continue.

Even though this represents a slowdown compared to the previous quarter, which had recorded a highest in four years, at 4.2%, the growth of the gross domestic Product (GDP), sustained by strong consumption, is higher than the forecasts of analysts. The dollar briefly rose to a two-month high against a basket of currencies on the data.

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. US Treasury yields fell. The GDP report showed the Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, increased at a 1.6 per cent rate in the third quarter. But some private economists worry that the recent stock market declines could be a warning signal of a coming slowdown. That was the fastest pace since the fourth quarter of 2014 and followed a 3.8 per cent pace of increase in the second quarter. "The economy grew at a 3.5 percent annual rate in Q3 - above expectations".

The economy has been expanding in the 2 percent range in the past few years, but growth spiked in the second quarter, boosted by consumer spending and exports.

After stripping out the volatile categories of trade, inventories and government spending, final sales of domestic product rose at an annual rate of 1.4% - lower than the overall GDP number. So far, much of the money from the tax cuts is not going directly to investments, but instead to stock buybacks, something Democrats predicted in their opposition of the bill.

Higher interest rates are pressuring the housing market, businesses are struggling to find workers and the import tariffs are increasing manufacturing costs for companies, such as Caterpillar, 3M and Ford. "It appears most business leaders have become somewhat cautious about the future and are holding off committing to major investment plans", said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "Housing remains a drag, however, as rates rise".



Latest news

IBM acquires Red Hat to take on Amazon and Microsoft
IBM intends to maintain Red Hat's headquarters, facilities, brands and practices. Whitehurst also will join IBM's senior management team and report to Rometty.

'Red Dead Redemption 2' Videos And Cowboys Have Taken Over Twitter
If you're struggling for wins, use the in-game rulebook for advice on domino tips and strategis for securing a victory. The 10 challenges require you to complete each one on a consecutive basis, so you can't take them all on at once.

Cavaliers forward Kevin Love out with sore foot
James got Staples Center rocking on a go-ahead dunk with 3:31 to play before Lonzo Ball made an artful step-back 3-pointer. James dominated with 28 points, 11 assists and 11 rebounds in his 74th career triple-double - the first with his new team.

Cruz Leads O'Rourke in Texas Race
Facebook's analysis shows as the midterm elections approached, numerous top spenders were high-profile candidates such as Rep. Ted Cruz in Texas this election cycle; smashing records and outpacing the GOP legislator by a two-to-one margin.

Other news