U.S. econ­omy at its strong­est in 2 years

Daily Local News (West Chester, PA) - - BUSINESS - By Martin Crutsinger AP Eco­nom­ics Writer

WASH­ING­TON» Don’t ex­pect much more from the U.S. econ­omy this year — it may have al­ready peaked.

Gross do­mes­tic prod­uct, the broad­est mea­sure of eco­nomic health, grew at an­nual rate of 2.9 per­cent in the July-Septem­ber quar­ter, shak­ing off a lack­lus­ter first half and ac­cel­er­at­ing to its strong­est growth in two years, the Com­merce Depart­ment re­ported Fri­day. The im­prove­ment was pow­ered by a re­bound in ex­ports and a de­ci­sion by busi­nesses to re­stock their shelves.

The lat­est fig­ure was dou­ble the 1.4 per­cent rate in the sec­ond quar­ter. The de­tails, how­ever, point to signs that the pace is un­likely to last.

The rise in ex­ports was fu­eled by a surge in ship­ments of soy­beans to South Amer­ica. That’s prob­a­bly not go­ing to hap­pen again. The strength in in­ven­tory re­build­ing also looks to fade in com­ing quar­ters.

More­over, con­sumer spend­ing growth slowed from a break­neck pace in the sec­ond quar­ter. Busi­ness in­vest­ment was barely pos­i­tive, still try­ing to re­cover from sharp cut­backs in the en­ergy in­dus­try af­ter oil prices plunged. Home con­struc­tion also con­tracted for a sec­ond quar­ter, al­though economists be­lieve that set­back will be tem­po­rary.

Gre­gory Daco, head of U.S. Macroe­co­nomics at Ox­ford Eco­nom­ics, said the third-quar­ter re-

sults “may be as good as it gets in 2016.” He fore­casts slower growth of around 2 per­cent in the cur­rent Oc­to­ber-De­cem­ber pe­riod.

“Go­ing for­ward, we ex­pect a mod­est ex­pan­sion in eco­nomic ac­tiv­ity, but we note the econ­omy may be in a frag­ile equi­lib­rium,” Daco wrote in a re­search note.

Still, the bet­ter-than-ex­pected GDP read­ing for the third quar­ter keeps the Fed­eral Re­serve on track to boost in­ter­est rates next month. Economists be­lieve a rate hike at next week’s meet­ing is un­likely so close to the U.S. pres­i­den­tial elec­tion.

Paul Ash­worth, chief U.S. econ­o­mist at Cap­i­tal Eco­nom­ics, said that the re­port “confirms that the eco­nomic re­cov­ery has re­gained some of the mo­men­tum lost within the last year.”

The Com­merce Depart­ment re­port was the gov­ern­ment’s first look at thirdquar­ter GDP. It will be sub­ject to two re­vi­sions over the next two months. It rep­re­sents one of the last ma­jor eco­nomic reports to be is­sued be­fore Amer­i­can vot­ers go to the polls on Nov. 8.

Democrats hailed the GDP re­bound af­ter three straight quar­ters of ane­mic growth av­er­ag­ing around 1 per­cent. But Repub­li­cans said the new fig­ure did not change their view that the coun­try’s cur­rent poli­cies need to be changed.

“Growth hasn’t risen above 3 per­cent for a full year in any year of the Obama pres­i­dency,” said Dan Kowal­ski, deputy pol­icy di­rec­tor for the Trump cam­paign. “The sin­gle most im­por­tant is­sue fac­ing the Amer­i­can peo­ple is an econ­omy that has failed to de­liver jobs, in­comes and op­por­tu­nity.”

GDP growth slumped into a pro­nounced slow­down late last year. Ex­porters were con­strained by a ris­ing dol­lar, which made their prod­ucts more ex­pen­sive on over­seas mar­kets. Busi­nesses cut back on boost­ing in­ven­to­ries in the face of weaker sales.

Given the dis­ap­point­ing first half, economists be­lieve growth for the en­tire year will be a mod­est 1.6 per­cent. The econ­omy grew 2.6 per­cent for all of 2015. This re­cov­ery from the deep 2007-2009 re­ces­sion has been the weak­est in the post-World War II pe­riod, with growth av­er­ag­ing around just 2 per­cent over the past seven years.

The GDP growth rate in the third quar­ter was the econ­omy’s best show­ing since it ex­panded at a 5 per­cent rate in the third quar­ter of 2014. In the fi­nal three months of last year, growth slowed to a 0.9 per­cent rate, fol­lowed by weak gains of 0.8 per­cent in the first quar­ter this year and 1.4 per­cent in the sec­ond quar­ter.

Ex­ports in the third quar­ter rose at a 10 per­cent rate. That was the fastest pace since late 2013. A nar­row­ing trade deficit added 0.8 per­cent­age points to growth.

Stronger in­ven­tory build­ing added 0.6 per­cent­age point to growth af­ter trim­ming it by 1.2 per­cent­age points in the sec­ond quar­ter.

Con­sumer spend­ing, which ac­counts for twothirds of eco­nomic ac­tiv­ity grew at a solid 2.1 per­cent rate but slower than the 4.1 per­cent spend­ing burst in the sec­ond quar­ter.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.