A final reading of US third-quarter GDP suggests the pace of economic expansion was slightly slower than previously estimated, however, the economy is still on track to post its best year since 2005.
Kristian Rouz — US economic growth appears to have been more modest in 3Q18 than estimated previously as both consumer spending and exports, the two key drivers behind the expansion, were subject to markdowns. The US economy is also expected to have cooled in the fourth quarter, although it is still on track to hit the 3-percent annual growth target.
According to the Commerce Department Friday, US GDP growth rate was 3.4 percent year-on-year, a downward revision from the previous estimate of 3.5 percent. This is also a slight slowdown from the 4.2-percent expansion in the second quarter.
The Department’s latest report is the final reading of 3Q18 GDP. However, broader trends suggest the US economy is still on track to its quickest expansion since 2005.
“With this third estimate for the third quarter, personal consumption expenditures (PCE) and exports were revised down, and private inventory investment was revised up; the general picture of economic growth remains the same”, the US Bureau of Economic Analysis said in a statement.
The Commerce Department said the slower consumer spending and exports contributed to a more robust build-up in stockpiles, while private-sector investment and construction were also slower than previously estimated.
Meanwhile, a faster rise in imports in the third quarter was a major subtraction from the GDP. This comes as a stronger US dollar has rendered imported goods more competitive on the domestic market. The “strong-dollar policy”, advocated by US President Donald Trump, has also weighed on US exports, as it makes American goods more expensive and less competitive on the international market.
This comes in line with the International Monetary Fund’s (IMF) expectations of a slowdown in the US economy.
“For the rest of the world, there seems to be some air coming out of the balloon. That will come back and also affect the US”, IMF chief economist Maurice Obstfeld said.
In light of this, current-dollar GDP posted a massive surge of 4.9 percent or $246.3 billion in Q3 to $20.66 billion.
The report also found US corporate profits extended gains in Q3, increasing $78.2 billion compared to $65.0 billion in the second quarter. This accelerating expansion is partially a result of the $1.5 trillion fiscal stimulus package enacted in late 2017.
The Department’s report also suggests the Trump administration’s supply-side reform is gradually advancing, as non-financial enterprises outperformed financial sector firms in the third quarter. Domestic non-financial companies posted an $83-billion increase in profits in Q3, while profits of domestic financials dropped $6.1 billion.
This points to the ongoing pivot to sustainable growth in the Main Street economy as opposed to the credit-fuelled demand-side economics of the previous two decades. However, household debt has also posted a significant increase throughout the year, suggesting a realignment in US productive forces and the structure of consumption could take several years.
But some say the ongoing reforms might require an additional fiscal stimulus, as last year’s tax cuts might not be enough.
“We have long been predicting somewhat lower (US GDP) growth for 2019 than what we are seeing this year”, the IMF’s Obstfeld said. “Part of that is the withdrawal or reversal of some fiscal incentives. That is going to be sharper probably in 2020 than in 2019, according to the data we are seeing”.
Meanwhile, forward-looking projections suggest the US economy is poised to have expanded 2.6 percent in this outgoing fourth quarter — the slowest since the beginning of the year. This according to the GDPNow forecast from the Federal Reserve Bank of Atlanta.
However, GDPNow suggests, fourth quarter expansion could inch closer to the 3-percent mark as well, and will largely depend on household expenditures during the holiday season, as well as the exports/imports correlation.
Sourse: sputniknews.com
