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US Third Quarter GDP Moves Above 3%

Posted by Joseph Trevisani on Nov 29, 2017 4:30:55 PM
The American economy expanded at a faster rate than originally thought in the third quarter as business and government outlays improved and consumption was revised slightly lower. 
 
Gross domestic product grew at a 3.3 percent annual pace in the second of three estimates from the Commerce Department,  up from the initial 3.0 estimate and slightly better than the 3.2 percent median forecast. 
 
Consumer spending, the largest part of the economy at about 70 percent,  grew 2.3 percent, revised down from the original 2.4 percent estimate and less than the second quarter's 3.3 percent rate.  Business investment  rose at a 10.4 percent yearly rate, adjusted higher from 8,4 percent.  Government expenditures increased 0.4 percent, higher than the first 0.1 percent measure. 
 
It was the fastest expansion since the third quarter of 2014 and a pickup from the prior quarter's 3.1 percent rate. 
 
The Atlanta Federal Reserve estimates growth in the current quarter at 3.4 percent, if that continues it would be the first three consecutive quarters of 3 percent or higher economic growth in almost a decade. 

The economy's robust and improving pace of expansion further strengthens the argument for a third Fed Funds rate increase in January.  Jerome Powell, President Trump's nominee to replace current Chair Janet Yellen said recently that the case for a rate increase next month was comng together.

Ms Yellen told Congress on Wednesday that "the economic expansion is increasingly broad-based across sectors," and that she expected that "the economy will continue to expand."

It is possible that the third quarter pace exagerates the overall stability of the expansion as the build in inventories, goods manufactured but not sold, contributed 0.8 percent to growth, revised from 0.73 percent. Absent this inventory addition the economy expanded at a 2.5 percent annual rate. 

But it is also possible that  businesses have  judged the  economic conditions correctly and the strong job market,  healthy home prices and booming equities will provide consumerss with the rationale for inceasing spending and purchasing that inventory. 

 
 Joseph Trevisani
Chief Market Strategist
WorldWideMarkets Online Trading
Charts: Thompson/Reuters, WWM Alpha Trader
 
GDP
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