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US economy grew at 2.9 per cent rate in third quarter

Nov 1 2016

USA real gross domestic product (GDP) increased at an annual rate of 2.9 percent in the third quarter of 2016, according to the "advance" estimate released Friday by the Bureau of Economic Analysis.

The 1.1 percent growth rate from January to June this year was the slowest first half since 2011, and it was well below what economists expected when 2016 began. The estimate, the bureau's first for this year's third quarter, is subject to future revision.

? Real final sales of domestically produced output increased 2.3 percent in the third quarter after increasing 2.6 percent in the second.

The choppy trading came following the release of a report from the Commerce Department showing that USA economic activity increased by more than expected in the third quarter.

"On the margin, this report should support the argument that the economy could handle a very small rate of increase", said James Marple, senior economist at TD Economics. The median forecast in a Bloomberg survey called for 2.6 percent growth.

Investment in residential construction fell for a second straight quarter, while spending by the government bounced back.

The nation's economic engine revved up this summer after a weak first half of the year, growing at its fastest pace since 2014 and adding new fodder for the presidential campaign and the interest rate-hike deliberations of the Federal Reserve.

The latest figure was double the 1.4 per cent rate in the second quarter.

Exports, which add to GDP, increased at a 10% rate in the third quarter, the best gain in almost three years. That was stronger growth than the second quarter's pace of 1.4%. It's overdue, but it's not necessarily reliable looking forward either. In the last seven years, The US economy has been steadily recovering though the rise maybe modest and not spectacularly big.

Lawrence Yun, chief economist at the National Association of Realtors, cautioned against precipitous action, since the economy´s expansion after the financial crisis has averaged only 2 percent.

Nonetheless, stronger real GDP growth in the third quarter will help make the case to the Federal Reserve for a short-term rate hike later this year.

This certainly improves on Q2 and Q1, assuming all of this holds up in the second and third estimates, but it's not a gamechanger. It's this underlying picture that matters more than more fickle quarterly data.

Many economists had predicted an anemic third quarter performance but the figures continued to rise, showing increases in exports and a decrease in imports last September.

Growth in the US economy accelerated in the third quarter of the year, posting its biggest gain in two years, according to Commerce Department numbers released Friday morning. Consumer spending, which accounts for more than two-thirds of US economic activity, is expected to have increased by as much as a 2.8 percent rate.

Consumption was the largest contributor to GDP growth, accounting for 1.5% of the gain, down from 2.9% during the second quarter.

Exporters were constrained by a rising United States dollars, which made their products more expensive on overseas markets, and businesses cut back on their inventory rebuilding in the face of weaker sales.

The economy bounced back from a prolonged slump in the third quarter as exports surged, businesses replenished depleted stocks and consumer spending picked up moderately. "Growth is solid enough for the Fed to move ahead in December".

Solid is a term of art, of course. Investment is now 1.2 percent below its year ago level, with non-residential structures down by 3.2 percent and equipment down by 4.5 percent, while investment in intellectual property products is up by 5.3 percent. Goldman Sachs said the decline earlier this year partly reflected an increase in starts of lower-priced homes rather than a drop in the volume of starts.

By Pers Perspectivabetica

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