The U.S. economy grew this summer at the fastest pace in two years, far outpacing economists’ forecasts.
The Commerce Department said U.S. gross domestic product—the government’s official economic scorecard—rose at a seasonally and inflation-adjusted 4.3 percent annual rate in the third quarter. The report on the July through September period was delayed due to the shutdown.
Gross domestic product is a broad measure of the goods and services produced across the economy. Economists had expected the economy to grow at a 3.2 percent annual rate after the second quarter’s 3.8 percent growth.
Prior to the inflation adjustment, the economy grew at an 8.2 percent rate.
Real final sales to private domestic purchasers, a slice of GDP that some economists view as a clearer measure of the health of the private sector, grew at a 3.0 percent annual rate, up from three percent in the second quarter. This suggests that demand from consumers and businesses remained strong and gathered a bit of steam over the summer.
Consumer spending grew much faster than expected, expanding at a seasonally and inflation-adjusted annual rate of 3.5 percent. That’s up from 2.5 percent in the second quarter and above the 2.7 percent expected.
Donald Trump’s trade policies appear to have added to growth in the third quarter, as exports rose 8.8 percent while imports fell 4.7 percent. Exports add to GDP while imports, because they represent foreign production, are subtracted.
Government spending added 0.39 points to growth.
The main drag was private inventory investment, which subtracted 0.22 points as wholesalers and manufacturers drew down stocks. This is likely to reverse in future quarters, adding to growth in future quarters. Fixed investment grew only 1.0 percent, with residential investment declining 5.1 percent, reflecting the sluggish housing market.
Due to the government shutdown, this “initial estimate” actually combines data typically used for both the advance and second estimates, so it may be more reliable than usual initial readings.
