Exports boost U.S. growth
in third-quarter; consumer spending slows
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[October 28, 2016]
By Lucia Mutikani
WASHINGTON
(Reuters) - The U.S. economy grew at its fastest pace in two years in
the third quarter as a surge in exports and a rebound in inventory
investment offset a slowdown in consumer spending.
Gross domestic product increased at a 2.9 percent annual rate after
expanding at a 1.4 percent pace in the second quarter, the Commerce
Department said on Friday in its first estimate. That was the strongest
growth rate since the third quarter of 2014.
Economists polled by Reuters had forecast GDP rising at a 2.5 percent
annual rate in the third quarter.
Despite the moderation in consumer spending, the third-quarter rise in
growth could help dispel any lingering fears the economy was at risk of
stalling. Over the first half of the year, growth had averaged just 1.1
percent.
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Though the Federal Reserve is mostly focused on employment and
inflation, signs of economic strength would be supportive of an interest
rate hike in December. The U.S. central bank raised its benchmark
overnight interest rate last December for the first time in nearly a
decade.
Consumer spending still supported the economy in the third quarter, even
as the pace slowed from the second quarter's robust 4.3 percent rate.
Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, increased at a 2.1 percent rate.
A surge in soybean exports helped to shrink the trade deficit in the
third quarter. Exports increased at a 10 percent rate, the biggest rise
since the fourth quarter of 2013. As a result, trade contributed 0.83
percentage point to GDP growth after adding a mere 0.18 percentage point
in the April-June quarter.
There are concerns that the soybean-driven export growth spurt could
reverse in the fourth quarter. Economists, however, also note that
exports of capital and consumer goods have been growing strongly in
recent months.
Businesses increased spending to restock after running down inventories
in the second quarter. Businesses accumulated inventories at a $12.6
billion rate in the last quarter, contributing 0.61 percentage point to
GDP growth.
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People shop at The Grove mall in Los Angeles November 26, 2013.
REUTERS/Lucy Nicholson
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Spending on nonresidential structures, which include oil and gas wells,
increased at a 5.4 percent rate in the third quarter, the fastest pace since the
second quarter of 2014, after falling at a 2.1 percent pace in the second
quarter.
Investment in mining, exploration, shafts and wells fell at a 31.5 percent rate
in the third quarter after dropping at a 57.4 percent pace in the second
quarter.
Business spending on equipment dropped for a fourth straight quarter, slipping
at a 2.7 percent rate. While the pace of decline has been ebbing as oil prices
stabilize and the dollar's rally gradually fades, a strong turnaround is
unlikely in the near-term.
Heavy machinery maker Caterpillar <CAT.N> this week reported a 49 percent drop
in third-quarter profit from a year ago and lowered its full-year revenue
outlook for the second time this year. Caterpillar said demand for new heavy
machinery had been undercut by an "abundance" of used construction equipment, a
"substantial" number of idle locomotives and a "significant" number of idle
mining trucks.
Investment in residential construction fell for a second straight quarter, while
spending by the government bounced back.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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