US growth slows less than expected

The US economy slowed less than expected in the third quarter, as a tariff-related drop in soybean exports was partially offset by the strongest consumer spending in nearly four years, keeping it on track to hit the Trump administration’s 3 per cent growth target this year.

Gross domestic product increased at a 3.5 per cent annualised rate, also supported by a surge in inventory investment and solid government spending, the Commerce Department said yesterday in its first estimate of third-quarter GDP growth. While that was a slowdown from a 4.2 per cent pace in the second quarter, it still exceeded the economy’s growth potential, which economists put at 2 per cent.

Compared to the third quarter of 2017, the economy grew 3.0 per cent, the best performance since the second quarter of 2015.

But business spending stalled and residential investment declined for a third straight quarter, potential red flags to the economic expansion that is now in its ninth year and the second longest on record.

Economists forecast GDP expanding at a 3.3 per cent pace in the third quarter. The economy is underpinned by a $1.5 trillion (Dh5.5 trillion) tax cut and increased government spending. The fiscal stimulus is part of measures adopted by US President Donald Trump’s administration to boost annual growth to 3 per cent on a sustainable basis.

The government is also locked in a bitter trade war with China, and last quarter’s slowdown mostly reflected the impact of Beijing’s retaliatory tariffs on US exports.