‘America is now enjoying a full-fledged boom…’
(AFP) Robust US GDP growth continued in the third quarter, the Commerce Department reported Friday.
Coming just 11 days before nail-biting midterm elections, the figures show the large head of steam still driving the world’s largest economy after tax cuts and fiscal stimulus enacted over the last year.
GDP grew at an annual rate of 3.5 percent for the July-September period, compared to 4.2 percent in the prior quarter. This overshot analyst expectations, according to the government’s preliminary estimate.
“The economy is now on a solid 3.5 to 4 percent growth path – far exceeding the 1.6 percent growth in Obama’s last year in office,” said Stephen Moore, a senior economic contributor for conservative grassroots activist group FreedomWorks. “With the lowest unemployment rate in decades and a manufacturing, construction and investment surge, with low inflation, America is now enjoying a full-fledged boom. This has been sparked by tax cuts, deregulation, and keeping government off the back of business.”
The result made for the strongest six-month period since mid-2014, although the strong result is based on preliminary data subject to revision.
President Donald Trump is banking on faster growth to pay for December’s tax cuts, which has driven the US budget deficit to a six-year high in the most recent fiscal year.
Officials said the GDP results also reflected damage from Hurricane Florence but they could not precisely estimate the impact on growth.
Consumers and companies were still enjoying a cash boost from the tax cuts, according to the Commerce Department.
Personal consumption rose four percent, the fastest since the end of 2014.
Companies, notably farmers and machine makers, also spent liberally to grow their inventories.
Trade conflicts hit growth
But the latest numbers also showed signs of continuing distortion from Trump’s trade wars with China and others. Economists say this poses a risk to growth and caused the International Monetary Fund to cut its global GDP forecasts into 2019.
Soybean exports fell sharply, weighing on growth, according the Commerce Department. This flipped the second quarter’s results on their head, when Chinese importers raced to build stockpiles ahead of July’s retaliatory tariffs by Beijing.
Meanwhile, American imports, which subtract from GDP calculations, rose sharply, largely driven by purchases of autos and consumer goods.
Total exports fell 3.5 percent, the weakest showing since the end of 2016, while imports gained 9.1 percent, the fastest growth since the end of last year.
Businesses also spent much less in building factories and offices than they had, as investment in structures fell 7.9 percent, the largest drop in nearly three years.
The struggling housing market was also a drag, falling by four percent from the prior quarter in its sharpest fall in more than a year.