ECONOMY GROWS at brisk 3.5 percent in Q3
Strong consumer spending pushes growth
WASHINGTON — The U.S. economy grew at a robust annual rate of 3.5 percent in the July-September quarter as the strongest burst of consumer spending in nearly four years helped offset a sharp drag from trade.
The Commerce Department said Friday that the third quarter’s gross domestic product, the country’s total output of goods and services, followed an even stronger 4.2 percent rate of growth in the second quarter. The two quarters marked the strongest consecutive quarters of growth since 2014.
The result was slightly higher than many economists had been projecting. It was certain to be cited by President Donald Trump as evidence his economic policies are working. But some private economists worry that the recent stock market declines could be a warning signal of a coming slowdown.
They noted that Friday’s GDP report showed business investment slowed dramatically in the third quarter, growing at an annual rate of just 0.8 percent, the weakest in nearly two years, after a much stronger 8.7 percent gain in second quarter.
Analysts said the slowdown could be an indication that last December’s tax cuts, which offered special breaks for business investment, were beginning to wane. There was also concern that the slowdown could reflect adverse impacts from rising trade tariffs with businesses less reluctant to invest under the threat of a trade war between the United States and China.
Gregory Daco, chief U.S. economist for Oxford Economics, said he expects more modest GDP growth in coming quarters, citing the fading impact of the tax cuts, higher interest rates from the Federal Reserve and increasing trade tensions.
For this year, economists are projecting the momentum built up should result in growth of 3 percent, the best annual showing in 13 years. But they believe the impact of Trump’s trade war with China and rising interest rates will slow growth in 2019 to around 2.4 percent.
Trump in recent weeks has accelerated his attacks on the Federal Reserve for raising interest rates, contending that the higher rates by slowing the economy will work against his efforts to speed up growth through the $1.5 trillion tax cut package Trump got Congress to pass last year.
“Every time we do something great, he raises interest rates,” Trump said in an interview this week with the Wall Street Journal in which he again said he viewed the Fed as the “biggest risk” facing the economy “because I think interest rates are being raised too quickly.”
The central bank has raised rates three times this year and signaled it will raise rates one more time this year and expect to raise rates three times in 2019. Those moves are being made to ensure that tight labor markets, with unemployment at a 49-year low of 3.7 percent, and strong growth don’t trigger unwanted inflation.