US econ­omy picks up pace even as elec­tion looms

The Myanmar Times - - International Business -

US eco­nomic growth ac­cel­er­ated to a 2.9 per­cent an­nual rate in the third quar­ter boosted by a big jump in ex­ports and solid con­sumer spend­ing, the Com­merce De­part­ment re­ported.

Com­ing just 10 days be­fore the pres­i­den­tial elec­tion in which the econ­omy has been a ma­jor is­sue, the GDP data showed the strong­est growth in two years, and beat the con­sen­sus fore­cast of 2.5pc.

Demo­cratic can­di­date Hil­lary Clin­ton’s cam­paign hailed the re­port as proof of the progress made in re­cov­er­ing from the global fi­nan­cial cri­sis, and said she has a plan to cre­ate more jobs by in­vest­ing in in­fra­struc­ture.

“With more than 15 mil­lion jobs cre­ated since early 2010 and real me­dian in­comes growing more than 5pc last year, it’s clear we’ve made real progress com­ing back from the cri­sis,” Clin­ton se­nior pol­icy ad­viser Ja­cob Leiben­luft said in a state­ment.

There was no im­me­di­ate re­ac­tion from the cam­paign of Repub­li­can can­di­date Don­ald Trump, who has re­peat­edly charged that the US econ­omy is “bro­ken” and says his pro­pos­als will ac­cel­er­ate growth.

The strong GDP re­port may in­crease the pres­sure on the Fed­eral Re­serve to raise in­ter­est rates this year, some­thing it has not done since De­cem­ber 2015. Most an­a­lysts ex­pect the Fed to do noth­ing at its next meet­ing on Novem­ber 2, and wait un­til De­cem­ber to act.

But a key in­fla­tion in­di­ca­tor in the GDP re­port, the per­sonal con­sump­tion ex­pen­di­tures price in­dex, slowed from the sec­ond quar­ter to a 1.4pc an­nual rate. The Fed has fo­cused its easy money pol­icy on boost­ing in­fla­tion to 2pc, based on the broader PCE price in­dex.

Lawrence Yun, chief econ­o­mist at the Na­tional As­so­ci­a­tion of Real­tors, cau­tioned against a pre­cip­i­tous rate in­crease, since the econ­omy’s ex­pan­sion after the fi­nan­cial cri­sis has av­er­aged only 2pc.

“The Fed­eral Re­serve could be tempted to hurry the in­ter­est rate hike be­cause of the good GDP num­ber,” he said, but pol­i­cy­mak­ers should keep in mind the econ­omy’s “sub­par per­for­mance” in the past six years.

In this ini­tial or ad­vance es­ti­mate of gross do­mes­tic prod­uct, the Com­merce De­part­ment said that ex­port growth of 10pc in the Ju­lySeptem­ber pe­riod, the big­gest jump since late 2013, drove the ex­pan­sion.

Per­sonal con­sump­tion also helped, as spend­ing rose 2.1pc in the pe­riod, though that was just half the rate of the prior quar­ter.

Fed­eral spend­ing rose 2.5pc after de­clin­ing in the last two quar­ters. De­spite the strong head­line num­ber, some economists say the re­port ex­ag­ger­ates growth and could be re­vised lower over the next two months.

“Th­ese data likely over­state growth sig­nif­i­cantly,” Ian Shep­herd­son, chief econ­o­mist at Pan­theon Macroe­co­nomics said.

He pointed to a surge in soy­bean ex­ports, say­ing “the head­line GDP num­ber looks good but the soy­bean ex­port surge will re­verse in Q4, and that’s a sig­nif­i­cant head­wind”.

Jim O’Sul­li­van, chief US econ­o­mist at High Fre­quency Eco­nomics, agreed.

“The farm-led surge in ex­ports in par­tic­u­lar looks ex­treme. Even so, the data only re­in­force the im­pres­sion that the trend in growth re­mains strong enough to keep the labour mar­ket im­prov­ing - the key pre­con­di­tion for more Fed tight­en­ing.”

White House chief econ­o­mist Ja­son Fur­man noted that the recovery in oil prices in re­cent months meant there was less of a drag on the econ­omy from oil-re­lated in­vest­ments.

In ad­di­tion, “Busi­ness fixed in­vest­ment also con­trib­uted pos­i­tively to GDP growth, though it con­tin­ues to be re­strained by slower global growth,” Mr Fur­man said.

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