Economy grows 3.3% in quarter
Business investment boosts growth rate to fastest since 2014
“The news on the economy had previously been good, but it just got a little better.” JIM BAIRD Chief investment officer, Plante Moran
WASHINGTON – Led by a rise in business investment, the U.S. economy grew at an annual pace of 3.3% from July through September, its fastest rate in three years.
The Commerce Department estimated Wednesday that third-quarter growth exceeded the 3% annual expansion for the period that it had initially reported last month.
The performance, achieved despite damage from two devastating hurricanes, marked the fastest expansion in gross domestic product — the broadest gauge of economic output — since a 5.2% annual spurt in the third quarter of 2014.
The estimated growth for the JulySeptember quarter marked an improvement on 3.1% annual growth in the second quarter and a 1.2% annual pace in the January-March quarter.
“The news on the economy had previously been good, but it just got a little better,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
Baird noted that the holiday shopping season appears to be off to a strong start, “which bodes well for consumer spending to propel the economy to a strong finish to the year.”
Before the revised third-quarter numbers came out, the Federal Reserve Bank of Atlanta was forecasting that growth would rise to a 3.4% annual pace in the final three months of 2017, which could bring growth for the full year close to 2.8%.
In 2016, the economy grew just 1.5%.
The economy showed resilience last quarter in the face of two hurricanes: Harvey, which hit Texas in late August, and Irma, which battered Florida in September.
The U.S. economy is benefiting from a pickup in global growth, a healthy job market, which supports consumer spending, and a drop in the value of the dollar against other major currencies, which makes U.S. products less expensive in foreign markets.
The momentum is being felt on Wall Street, as the U.S. stock market continues to surge to new highs.
The Dow Jones industrial average pierced the 23,900 mark for the first time Wednesday, closing up 103 points, or 0.4%, to 23,940, a record.
Almost half of that gain was attributable to the stock of UnitedHealth.
Other highlights from the Commerce Department’s GDP report Wednesday included:
Business investment increased at a strong 7.3% annual pace from July through September, the sharpest pickup since the end of 2016.
Consumer spending, which accounts for about 70% of U.S. economic output, grew at an annual pace of 2.3%, down from 3.3% in the second quarter.
Government spending and investment rose for the first time in three quarters, led by an uptick in defense spending.
The Commerce Department’s third and final estimate of thirdquarter GDP will come out on Dec. 21.
The Federal Reserve’s preferred gauge of inflation, which is included in the GDP report, rose at an annual pace of just 1.5%, well below the Fed’s 2% target.
The Fed is still widely expected to raise interest rates in December for the third time this year.
Outgoing Federal Reserve Chair Janet Yellen told Congress Wednesday that she generally supports legislation that would ease the burdensome oversight of banks enacted since the financial crisis, a potentially significant endorsement from a top regulator who has favored the toughened rules.
In testimony before the Joint Economic Committee Yellen emphasized that she hasn’t closely reviewed the bill but called it “a move in a direction that we think would be good.”