WASHINGTON- US economic growth nudged up in the third quarter and the economy appears to have maintained the moderate pace of expansion as the year ended, supported by a strong labor market.
Other data on Friday showed consumer spending increased solidly in November, adding to a string of upbeat data that have helped to quell recession fears which gripped financial markets in the summer.
The longest expansion in history, now in its 11th year, remains on track thanks to the Federal Reserve cutting interest rates three times this year. The US central bank last week kept rates steady and signaled borrowing costs could remain unchanged at least through 2020.
Though growth has been relatively strong, economists did not expect the economy to achieve the Trump administration’s 3.0 percent target this year. Still, the resilient economy could offer some respite for President Donald Trump who was impeached on charges of abusing his office on Wednesday by the Democratic-led House of Representatives.
“The data will comfort the Fed that the economy is in ‘a good place’ and monetary policy is ‘appropriate’,” said Gregory Daco, chief US economist at Oxford Economics in New York.
Gross domestic product increased at a 2.1 percent annualized rate, the Commerce Department said in its third estimate of third-quarter GDP. That was unrevised from November’s estimate. The economy grew at a 2.0 percent pace in the April-June period.
Despite the unrevised estimate, which was in line with economists’ expectations, consumer spending was stronger than previously reported in the third quarter.
There were also upgrades to business spending on nonresidential structures such as power infrastructure, which limited the drop in overall business investment. That offset downward revisions to investment in homebuilding and inventory accumulation. Imports, which are a drag to GDP growth, were higher than previously estimated.
Growth estimates for the fourth quarter range from as low as a 1.5 percent rate to as high as a 2.3 percent pace. Growth has slowed from the 3.1 percent rate notched in the first three months of the year in part because of the 17-month trade war between the United States and China and the fading stimulus from last year’s $1.5 trillion tax cut package.
When measured from the income side, the economy grew at a 2.1 percent rate in the last quarter, rather than the 2.4 percent pace estimated in November. Gross domestic income (GDI) increased at a rate of 0.9 percent in the second quarter.
The revision to the income side of the growth ledger reflected a downgrade to corporate profits.
After-tax profits without inventory valuation and capital consumption adjustment, which corresponds to S&P 500 profits, were revised down to show them declining $23.1 billion, or at a rate of 1.2 percent. Profits were previously reported to have decreased $11.3 billion, or at a rate of 0.6 percent in the third quarter.
They were in part held down by legal settlements with Facebook and Google. Profits increased at a 3.3 percent rate in the second quarter. The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, also increased at a 2.1 percent rate in the July-September period.
The data boosted the dollar against a basket of currencies, while US Treasury prices fell.
Stocks on Wall Street were treading higher, pushing key indexes to new record highs.
The economy’s moderate growth speed appears to have persisted in the fourth quarter. In a second report on Friday, the Commerce Department said consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.4 percent last month as households stepped up purchases of motor vehicles and spent more on healthcare. Consumption increased 0.3 percent in October. – Reuters