U.S. Third Quarter GDP at 2.9%

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The U.S. economy grew at a 2.9-percent rate in the third quarter, according to the advance reading of U.S. Gross Domestic Product (GDP). The figure was the strongest performance for the U.S. economy since the third quarter of 2014 and ahead of expectations for a 2.5 percent figure.

Soybean exports helped. Increased exports and a rise in inventory accumulation helped move the figure higher, with agricultural exports like soybeans a positive contributor to that picture. An indication of this situation came in the International Trade in Goods report released earlier this week showing a smaller than expected trade deficit. The full trade update for September will be released November 4.

Consumer spending did not provide as much of a boost to the economy compared to the second quarter as it rose 2.1 percent against the 4.3-percent rise seen in the second quarter. Consumer spending on nondurable goods and housing were not as high as expected. State and local government spending also declined and business spending on equipment posted its fourth straight quarterly decline but the rate of decline moderated from prior marks.

Comments: The overall reading paints a positive picture for the U.S. economy and continues the pattern seen in two of the last three years of the third quarter showing improvement in the U.S. economy compared to the second quarter – 2015 was the exception to that pattern. This will be read as supporting an increase in the range of the Fed funds rate at the Fed’s December meeting. This may also bode well for Democratic presidential candidate Hillary Clinton as expectations are her policy path forward would be similar to that of the current administration.

NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.