begin quote from:
US Economy Roars Back, Grew 2.9% in Third Quarter
| Wall Street Journal | - |
WASHINGTON—U.S.
economic growth accelerated last quarter, easing fears of a near-term
slowdown but doing little to change the trajectory of a long but weak
expansion.
U.S. Economy Roars Back, Grew 2.9% in Third Quarter
Growth rate was the fastest recorded in two years after expanding an anemic 1.4% in the second quarter
ENLARGE
Errol Barrett brazing a bicycle frame at the Worksman Cycles facility in New York in 2012.
Photo:
Scott Eells/Bloomberg News
Gross domestic product, a broad measure of goods and services produced across the economy, expanded at an inflation- and seasonally adjusted 2.9% annual rate in the third quarter, the Commerce Department said Friday. That was stronger growth than the second quarter’s pace of 1.4%. Economists surveyed by The Wall Street Journal expected growth at a 2.5% pace for the July-to-September period.
Last quarter’s growth rate was the fastest recorded in two years.
The third-quarter acceleration largely reflected increased exports and a buildup of inventories, while consumer spending increased at a slower rate.
ENLARGE
Friday’s data also gave voters their last comprehensive look at the economy’s health before the November election.
The improvement could give Democratic presidential nominee Hillary Clinton more latitude to position herself as the candidate to continue Obama administration policies that have led to a long expansion. Still, the most recent gain comes in the weakest expansion in recent memory, a point Republican candidate Donald Trump makes frequently.
Since the recession ended in mid-2009 the economy has grown at roughly a 2% annual rate, making the current expansion the weakest on records back to 1949.
“Acceleration in growth in the third quarter, as well as continued improvement in the labor market and indications of higher inflation,” will lead the Fed “to boost the federal funds” in December, PNC Financial Services economists wrote in a note Friday.
The third-quarter GDP report showed consumer-spending gains slowed after a strong advance this spring. Personal-consumption expenditures rose at a 2.1% pace in the third quarter compared with a 4.3% gain during the prior period. Spending on long-lasting durable goods such as cars and appliances rose grew at better than 9% in the past two quarters.
Consumer spending accounts for about two-thirds of total output.
“Some of that surge was due to a one-off spike in soybean exports,” said Paul Ashworth, chief U.S. economist at Capital Economics. “But it is still a welcome sign that the dollar appreciation in 2014 and 2015 is no longer weighing on exporters.”
Imports, which subtract from domestic output, increased at a 2.3% rate. In total, trade contributed 0.83 percentage point to overall growth.
The change in private inventories, a drag on output the five previous quarters, contributed 0.61 percentage point to the overall growth rate in the third quarter. An increase in stockpiles could indicate businesses are more confident in future demand.
A measure of economic growth that excludes inventory effects, real final sales of domestic product, rose at a 2.3% pace in the third quarter, a slight slowdown compared with a 2.6% increase in the second quarter.
A measure of business spending, nonresidential fixed investment, rose at a 1.2% rate versus the prior quarter’s 1% advance. Firms increased spending on building structures, but reduced outlays on equipment for the fourth straight quarter. Spending on intellectual property, including research and development and software, advanced at a slower pace than in the prior quarter.
Rapid sales growth at Proto Labs Inc. slowed over the past year, particularly for clients tied to industrial equipment and commodities, said Chief Executive Officer Vicki Holt. The Maple Plain, Minn., manufacturer uses 3-D printing to create prototypes. “There’s just some cautiousness that I feel in the environment,” she said. “An increased number of customers tell us the reason they haven’t bought yet is because projects have been delayed or canceled.”
Spending on home building and improvements fell for the second straight quarter. Residential fixed investment declined at a 6.2% pace in the third quarter. Until this spring, residential investment had been a driver of economic growth since mid-2014.
Government spending advanced at a 0.5% rate last quarter, with stronger federal spending offsetting a decline at the state and local level.
The latest data suggests the economy this year isn’t likely to top 2015’s 2.6% growth rate, the best annual reading of the expansion. The economy has failed to grow better than a 3% in any year since 2005, and many economists expect such growth will remain a rarity. The nonpartisan Congressional Budget Office projects GDP to grow at around 2% annually through 2026. Federal Reserve policy makers have pegged longer-run output gains at a 1.8% annual rate.
Friday’s report showed inflation pressures eased during the summer.
The price index for personal-consumption expenditures rose at a 1.4% seasonally adjusted annual rate in the third quarter from the second. Consumer prices rose at a 2% rate during the second quarter. When excluding volatile food and energy costs, the price index increased at a 1.7% rate in the third quarter.
Corrections & Amplifications:
The gross domestic product report was released on Friday. An earlier version of this article online incorrectly stated the report came out on Thursday. (10/28)
Write to Eric Morath at eric.morath@wsj.com
