U.S. weathers storms to post solid growth in 2 straight quarters

Consumers, businesses boost economy despite damage from hurricanes

WASHINGTON Powered by businesses and consumers, the U.S. economy grew at a solid three per cent annual pace last quarter despite two devastating hurricanes — evidence of economic durability and all but assuring that the Federal Reserve will resume raising interest rates late this year.

Friday’s figures from the government marked the first time in three years that the economy has expanded at a three per cent or more annual rate — historically, a normal pace for a healthy economy — for two straight quarters.

More than eight years since the Great Recession officially ended, the economy is still posting consistent gains — in the job market, in business investment, in consumer spending and corporate earnings. Unemployment is at a 16-year low. Companies are restocking. An improving global economy is boosting U.S. exports. Stock prices are rising in tandem with company profits.

The three-per-cent annual growth for the July-September quarter in gross domestic product — the total output of goods and services produced in the United States — followed a 3.1 per cent annual pace in the previous quarter. It was the strongest two-quarter showing since 2014.

The economy managed to expand at a healthy rate last quarter despite the damage inflicted by hurricanes Harvey and Irma, which many economists think shaved at least one-half of one percentage point off annual growth in the July-September period.

U.S. President Donald Trump has pledged to accelerate growth from the tepid 2.2-per-cent annual averages that prevailed since the recession ended in 2009. The administration was quick to hail the GDP report as evidence that Trump’s economic program was already helping to lift the economy.

Commerce Secretary Wilbur Ross asserted that Friday’s GDP report “proves that President Trump’s bold agenda is steadily overcoming the dismal economy inherited from the previous administration . ... And as the president’s tax cut plan is implemented our entire economy will continue to come roaring back.”

The administration contends that Trump’s proposals for tax cuts, deregulation and tougher enforcement of trade laws will achieve annual growth exceeding three per cent in the coming years.

Most economists, though, have said they think that even threeper-cent annual gains will be hard to achieve for an economy that is enduring a slowdown in work productivity as well as an aging workforce. Many analysts believe annual growth in the current October-December quarter will amount to a rate of around 2.7 per cent.

Paul Ashworth, chief U.S. economist at Capital Economics, said he envisions just 2.1-per-cent growth for all of 2017. He suggested that if the Trump administration manages to shepherd at least a modest tax cut measure through Congress, growth in 2018 could accelerate to 2.5 per cent. But he said he expects the Fed’s interest rate increases to slow the economy’s growth to just 1.5 per cent in 2019.

Harvey made initial landfall in Texas on Aug. 25, and Irma blitzed Florida on Sept. 10. The government could not estimate how much the hurricanes had weakened overall U.S. growth last quarter. Private economists have estimated that the storms sapped between one-half and one percentage point from annual growth in the July-September period. But analysts say they think much of that lost output will be recovered as the affected areas are rebuilt.