US GDP smashes growth consensus forecasts

Jasper Jolly
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The US economy grew at a faster pace than expected in the third quarter (Source: Getty)

The American economy grew at a much faster rate than economists expected, expanding by three per cent in the year to September.

While that represented a slowdown from the second quarter's annual growth of 3.1 per cent, third-quarter annualised growth came in far above consensus expectations of 2.5 per cent, according to preliminary figures from the US Bureau of Economic Analysis (BEA).

Falling personal spending and business investment explained the marginal slowdown, according to the BEA. However, private inventory investment and falling imports (which drag down the GDP reading) boosted the headline growth figure.

Read more: US GDP slowdown wasn't actually so bad

US GDP increased by $246bn to reach $19.5 trillion during the quarter.

Economists had, on average, expected a much greater slowdown after hurricanes caused widespread damage along the US southeast and stopped economic activity in some areas for days.

The US economy has maintained strong momentum over the last six months after a weak start to the beginning of the year: first-quarter growth reached only 1.2 per cent annually, the weakest since the first quarter of 2016.

President Donald Trump has previously promised to push growth to an annual rate of four per cent, although many economists, including at the International Monetary Fund, doubt it will be able to achieve that.

Read more: The US economy lost jobs in September for the first time since 2011

Trump is trying to push through a wide-ranging package of tax cuts which he and his supporters claim will stimulate a boom in growth. The tax package, if passed, would be Trump's first major legislative achievement, after a year in which he has repeatedly failed to marshal legislation through both houses of Congress.

Today's positive news for the Trump administration could be subject to revision lower during later estimates, according to Manuel Ortiz-Olave, market analyst at Monex Europe.

"Despite the first estimate of US GDP for the third quarter showing a strong print, the reality is quite different. Personal consumption expenditures, a key measure of consumer spending, decelerated significantly in the third quarter – a real concern given that this is the main source of economic growth in the US."

Read more: Trading Trump

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