U.S. economic growth slows less than expected in third quarter

U.S. economic growth slows less than expected in third quarter

Momentum is, however, expected to slow as wage growth remains gradual despite the unemployment rate being at a near 49-year low of 3.7 per cent.

U.S. gross domestic product increased at a 3.5% annualised rate also supported by solid government spending, the Commerce Department said.

"[Trump's] America First agenda is creating opportunities, increasing prosperity & GROWING the economy", Vice President Mike Pence said in a tweet.

American consumers helped to deliver another solid quarter of economic growth, putting the world's largest economy on track to hit Donald Trump's target of 3 per cent expansion this year.

"The headline was not too far from expectations, but we did get a few surprises".

Former White House economist Jared Bernstein said the strong showing reflects the fact that so many people are in the job market. Companies paused spending earlier than some economists expected given the fiscal boost from Republican-backed tax cuts. "Another boost to real GDP growth in the third quarter came from stock-building". "Specifically, overall fixed investment spending contracted 0.3%".

In its release, the BEA said, "The increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, state and local government spending, federal government spending, and nonresidential fixed investment that were partly offset by negative contributions from exports and residential fixed investment".

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Officials said the GDP results also reflected damage from Hurricane Florence but they could not precisely estimate the impact on growth.

Yet the government is also locked in a bitter trade war with China as well as trade disputes with other trade partners and the last quarter's slowdown mostly reflects the impact of Beijing's retaliatory tariffs on US exports, including soybeans.

Earlier this week, The Wall Street Journal wrote, "A stark pickup in government spending, particularly in defense, has helped fuel a broad acceleration in US economic growth in the past year and a half", with the sharp uptick in outlays associated with the budget deal earlier this year accounting for almost half of the economic growth during that time.

Paul Ashworth, chief U.S. economist at Capital Economics: "The current strength of the economy is largely due to the boost from the massive fiscal stimulus at the start of this year. And the tax cut they constructed with President Trump has been staggeringly tilted toward the rich and as inefficient and wasteful as fiscal stimulus could possibly be". Business spending on equipment increased at a 0.4 per cent rate, the slowest in two years, after rising at a 4.6 per cent pace in the second quarter. World GDP would fall further should Trump follow through on all his trade threats, including global duties on cars, the International Monetary Fund said.

The chart indicates that real GDP growth ("real" means adjusted for inflation) is expected to drop significantly in the long run. Right now, the Fed is raising interest rates to keep inflation in check, a clear sign of concern the economy could overheat. According to analysts, the industry is slowing amid higher prices and rising mortgage rates.

The struggling housing market was also a drag, falling by four per cent from the prior quarter in its sharpest fall in more than a year.

Government spending rose at a pace of 3.3% during the third quarter, the fastest since the first quarter of 2016.

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