Economy grew at 3.2 percent rate in third quarter

WASHINGTON — The U.S. economy grew at a solid 3.2 percent annual rate from July through September, slightly slower than previously estimated but still enough to give the country the best back-to-back quarterly growth rates in three years.

 

The figure was revised down from last month’s estimate of 3.3 percent, the Commerce Department reported Thursday. The change reflected a bit less spending by consumers, which was offset somewhat by increased spending by state and local governments.

Still, the 3.2 percent growth followed a 3.1 percent gain in the second quarter, the first consecutive quarters that growth has topped 3 percent since 2014.

President Donald Trump has pointed to these gains as evidence his economic program is producing results. Many economists believe GDP growth this quarter could hit 3 percent or better.

Congress this week passed a major tax overhaul, giving Trump the biggest legislative achievement of his first year in office. Economists believe the proposal will boost growth temporarily in 2018 and possibly 2019. But then they forecast that the positive effects will fade, with slower growth going forward due to higher interest rates stemming from the bigger government deficits.

But at the moment, economists are optimistic about growth prospects. The Federal Reserve’s Atlanta regional bank is forecasting GDP growth could hit 3.3 percent this quarter. If GDP does top 3 percent, it would mark the first time that has occurred since three quarters in late 2004 and early 2005.

Trump has predicted the tax cuts will be “rocket fuel” for the economy and many economists are looking for a growth spurt next year.

“The economy is rock solid for now and with fiscal stimulus kicking in next month, the economy’s afterburners could put this economy’s rocketing growth rate into even higher orbit,” Chris Rupkey, chief financial analyst at MUFG Union Bank in New York, said in reaction to the new GDP report.

For all of 2017, the economy is expected to grow around 2.3 percent, a marked improvement from the slight 1.5 percent gain in GDP in 2016.

WHAT YOU NEED TO KNOW

• Business investment in equipment shot up at a 10.8 percent rate, the best showing since the third quarter of 2014.

• Consumer spending, which accounts for about 70 percent of U.S. economic output, grew at an annual pace of 2.2 percent, a slight 0.1 percentage point less than last month’s estimate.

• Government spending and investment rose for the first time in three quarters, with spending by state and local governments revised to a small positive from a slight negative in the previous report.

• Housing construction fell for a second quarter, but the drop was not as severe as previously reported.

• The 1.5 percent annual GDP gain last year was the weakest performance in six years, since the economy contracted by 2.9 percent in 2009.

• GDP growth has averaged around 2 percent in the current recovery, which is now in its ninth year and is the third longest in U.S. history.

–Associated Press

 

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