Business
22:26, 27-Oct-2017
US economy grows 3 percent in third quarter on inventories, trade
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An increase in inventory investment and a smaller trade deficit offset a hurricane-related slowdown in consumer spending and a decline in construction, helping the US economy maintain a brisk pace of growth in the third quarter, the Commerce Department said on Friday.
The department said that, while it was impossible to estimate the overall impact of hurricanes Harvey and Irma on third-quarter GDP, preliminary estimates showed that the back-to-back storms had caused losses of 121 billion US dollars in privately owned fixed assets and 10.4 billion US dollars in government-owned fixed assets.
Harvey and Irma struck parts of Texas and Florida in late August and early September. Hurricane Maria, which destroyed infrastructure in Puerto Rico and the Virgin Islands, had no impact on third-quarter GDP growth as the islands are not included in the United State’s national accounts.
Economists polled by Reuters had forecast the economy growing at a 2.5 percent pace in the third quarter. Excluding inventory investment, the economy grew at a 2.3 percent rate, slowing from the second quarter’s 2.9 percent pace.
With a post-hurricane labor market, retail sales and industrial production data already showing an acceleration in underlying economic activity, Friday’s report will probably have no impact on monetary policy in the near term.
Federal Reserve Chair Janet Yellen cautioned last month that economic growth in the third quarter “will be held down” by the severe disruptions caused by the hurricanes.
Though US stocks have risen in anticipation of President Donald Trump’s tax reform, the administration has yet to enact any significant new economic policies. Trump wants big tax cuts and fewer regulations to boost annual GDP growth to 3 percent.
Businesses accumulated inventories at a 35.8 billion US dollars pace in the third quarter in anticipation of strong demand. As a result, inventory investment contributed 0.73 percentage points to third-quarter GDP growth, after adding just over a tenth of a percentage point to growth in the prior period.
Exports increased at a 2.3 percent rate in the third quarter, while imports fell at a 0.8 percent pace. That left a smaller trade deficit, leading to trade adding 0.41 percentage point to GDP growth. Trade has contributed to output for three quarters in a row.
Hurricanes Harvey and Irma, which hurt incomes and undercut retail sales in August, crimped consumer spending in the third quarter. Growth in consumer spending, which accounts for more than two-thirds of the U.S. economy, slowed to a 2.4 percent rate following a robust 3.3 percent pace in the second quarter.
Source(s): Reuters