US growth in the third quarter not revised; stronger winds

WASHINGTON (Reuters) – The US economy slowed down in the third quarter, as previously announced, but the pace was probably strong enough to maintain growth on the 3% target set by the Trump government this year, so that the pace seems to be still moderate early in the fourth quarter.

Gross Domestic Product grew by 3.5% on an annualized basis, the Commerce Department said Wednesday in its second estimate of GDP growth in the third quarter. This figure was unchanged from its October estimate and was well above the growth potential of the economy, estimated by economists at around 2%.

The economy grew at a rate of 4.2% in the second quarter. Although firms have accumulated inventories faster and spent more on equipment than previously thought in the third quarter, this decline has been offset by downward revisions in consumer spending and exports.

Growth is driven by the White House's $ 1.5 trillion tax relief package, which has disrupted consumer spending and supported business investment. The fiscal stimulus is part of the measures adopted by the administration of President Donald Trump to bring annual growth to 3% in a sustainable manner.

The government also announced Wednesday that after-tax corporate profits rose 3.3% in the final quarter, following a 2.1% increase in the second quarter.

Gross Domestic Income (GDP), an alternative measure of economic growth, rose 4.0% in the third quarter, accelerating from the 0.9% pace recorded in the second quarter.

The average GDP and RIB, also called gross domestic output and considered a better measure of economic activity, increased by 3.8% between July and September, compared to 2.5% in the second quarter.

But dark clouds are forming on the economic expansion that is in its ninth year and the second longest ever recorded. The goods trade deficit has further widened in October, under pressure from declining exports of soybean, equipment goods and automobiles, the Commerce Department said Wednesday in another report.

New home sales fell in October, the latest indication that the housing market was slowing due to rising interest rates.

Data released last week showed business capital spending fell in October and the price of Brent crude oil could fall by more than 30 percent from its peak of more than $ 86 in early September. The cheaper oil tends to hurt investment in the energy sector because of reduced profits.

General Motors Co (GM.N) said on Monday that it was going to reduce thousands of people from its North American workforce, reduce its production and eliminate some models of slow-selling cars, which could have adverse effects. training on the national economy.

Strong third-quarter growth should allow the Federal Reserve to keep interest rates in December for the fourth time this year, in December, despite Trump's criticism that tightening monetary policy would slow the pace of interest rates. 'economy.

The second estimate of GDP growth between July and September was in line with economists' forecasts. US financial markets were little affected by the data.

CONSUMER EXPENDITURE REVISED BELOW

Growth estimates for the fourth quarter are currently around 2.5%. Economists expect GDP growth to slow further in 2019, as a result of the gradual reduction in fiscal stimulus and the effects of a fierce trade war with China, as well as dollar strength.

The slowdown in growth in the third quarter is mainly due to the impact of Beijing's retaliatory tariffs on US exports, including soybeans. Deliveries made by farmers to China before tariffs came into effect in early July boosted growth in the second quarter. Since then, soybean exports have declined each month, increasing the trade deficit.

Imports grew a little faster than in the third quarter compared to previous estimates, while export declines were much sharper, widening the trade deficit, reducing GDP growth by 1.91 points. in the third quarter, instead of 1.78 points. reported last month. This was the peak since the second quarter of 1985.

The rebound in imports is partly due to strong domestic demand and also reflects the companies' eagerness to store their products before US import duties, mainly on Chinese products, came into effect at the end of the year. third trimester.

Imports subtract from GDP growth. However, some of the imports were likely to end up in warehouses, which added to stocks, which contributed to GDP. Inventories increased at a rate of $ 86.6 billion, up from $ 76.3 billion estimated in October.

As a result, investment in stocks added 2.27 percentage points to GDP growth. That was more than the 2.07 percentage points reported last month and made the largest contribution since the fourth quarter of 2011.

Consumer spending growth, which accounts for more than two-thirds of US economic activity, increased 3.6% in the third quarter, down from 4.0% in October.

Business capital expenditures increased by 3.5% instead of the previously announced 0.4%. It was still the slowest pace for two years. The moderation of business spending has been attributed to import tariffs, which increase manufacturing costs for companies such as Caterpillar Inc. (CAT.N), 3M Co (MMM.N) and Ford Motor Co F.N ..

Some companies, including Apple (AAPL.O) used their tax boon to buy back large-scale shares.

Chart: Interactive US GDP – tmsnrt.rs/1jLPbzVGraphic: Interactive US-ECONOMY-HOMESALES – tmsnrt.rs/1SX25aY