U.S. third-quarter economic growth raised to 3.3 percent
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[November 29, 2017]
WASHINGTON, (Reuters) - The U.S. economy
grew faster than initially thought in the third quarter, notching its
quickest pace in three years, as increases in business investment in
inventories and equipment offset a moderation in consumer spending.
Gross domestic product expanded at a 3.3 percent annual rate in the
third quarter also boosted by a rebound in government spending, the
Commerce Department said in its second estimate on Wednesday. That was
the fastest pace since the third quarter of 2014 and a pickup from the
second quarter's 3.1 percent rate.
The economy was previously reported to have grown at a 3.0 percent pace
in the July-September period. It was the first time since 2014 that the
economy experienced growth of 3 percent or more for two straight
The growth pace, however, likely exaggerates the health of the economy
as inventories, goods yet to be sold, contributed 0.8 percentage point
to third-quarter GDP growth - up from the previously reported 0.73
Excluding inventory investment, the economy grew at a 2.5 percent rate.
When measured from the income side, output also expanded at a 2.5
percent rate. The government said after-tax corporate profits surged at
a 5.8 percent rate last quarter after rising at only a 0.1 percent pace
in the second quarter.
Economists polled by Reuters had expected that third-quarter GDP growth
would be raised to a 3.2 percent rate.
The economic recovery since the 2007-2009 recession is now in its eighth
year and showing little signs of fatigue. The economy is being powered
by a tightening labor market, which has largely maintained a strong
performance that started during former President Barack Obama's first
Economists see a modest boost to growth from efforts by President Donald
Trump and his fellow Republicans in Congress to push through a broad
package of tax cuts, including slashing the corporate income tax rate to
20 percent from 35 percent.
Trump wants lower taxes to lift annual GDP growth to 3 percent on a
sustained basis. The fiscal stimulus would, however, come when the
economy is at full employment.
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A Boeing worker is pictured in the wing system installation area at
their factory in Renton, Washington, U.S., February 13, 2017.
INVENTORIES BOOST GROWTH
Businesses accumulated inventories at a $39.0 billion pace in the third quarter,
instead of the previously reported $35.8 billion rate. That suggests inventories
could be a drag on growth in the fourth quarter.
Data on Tuesday showed a drop in wholesale and retail inventories in October,
leading economists to slash their fourth-quarter GDP growth estimates.
Growth in consumer spending, which accounts for more than two-thirds of the U.S.
economy, was revised to a 2.3 percent rate in the third quarter from the
previously reported 2.4 percent pace. Consumer spending increased at a brisk 3.3
percent rate in the second quarter.
The deceleration in consumer spending likely reflects the impact of Hurricanes
Harvey and Irma, which struck Texas and Florida in early August and late
September. Spending also is being constrained by sluggish wage growth, which is
forcing households to dip into their savings to fund purchases.
The saving rate was lowered to 3.3 percent in the third quarter from the
previously reported 3.4 percent.
Growth in business investment in equipment was raised to a 10.4 percent pace,
the fastest growth pace in three years, from the previously reported 8.6 percent
Investment in nonresidential structures fell at a 6.8 percent pace in the third
quarter, the biggest drop since the fourth quarter of 2015, instead of the
previously estimated 5.2 percent rate.
Growth in government spending was raised to a 0.4 percent rate. Government
outlays were previously reported to have declined at a 0.1 percent pace in the
third quarter. Government spending had contracted for two consecutive quarters.
((Reporting by Lucia Mutikani; Editing by Andrea Ricci))
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