Figures still add up to a solid U.S. economy
WASHINGTON - The U.S. economy grew at a solid 3.2 percent annual rate from July through September, slightly slower than previously estimated but still enough to give the country the best back-to-back quarterly growth rates in three years.
The figure was revised down from last month’s estimate of 3.3 percent, the Commerce Department reported Thursday. The change reflected a bit less spending by consumers, which was offset somewhat by increased spending by state and local governments. Still, the 3.2 percent growth followed a 3.1 percent gain in the second quarter, the first consecutive quarters that growth has topped 3 percent since 2014.
President Donald Trump has pointed to these gains as evidence his economic program is producing results. Many economists believe GDP growth this quarter could hit 3 percent or better.
Congress this week passed a major tax overhaul, giving Trump the biggest legislative achievement of his first year in office. Economists believe the proposal will boost growth temporarily in 2018 and possibly 2019. But then they forecast that the positive effects will fade, with slower growth going forward due to higher interest rates stemming from the bigger government deficits.
But at the moment, economists are optimistic about growth prospects. The Federal Reserve’s Atlanta regional bank is forecasting GDP growth could hit 3.3 percent this quarter. If GDP does top 3 percent, it would mark the first time that has occurred since three quarters in late 2004 and early 2005.
Trump has predicted the tax cuts will be “rocket fuel” for the economy, and many economists are looking for a growth spurt next year.
“The economy is rock solid for now, and with fiscal stimulus kicking in next month, the economy’s afterburners could put this economy’s rocketing growth rate into even higher orbit,” Chris Rupkey, chief financial analyst at MUFG Union Bank in New York, said in reaction to the new GDP report.
For all of 2017, the economy is expected to grow 2.3 percent, a marked improvement from the slight 1.5 percent gain in GDP in 2016. For 2018, economists believe growth will be even better, helped by the boost from the Republican tax cuts and a stronger global economy.
Thursday’s report on third-quarter growth was the government’s third and final look at the quarter. The economy showed resilience last quarter in the face of two hurricanes: Harvey, which hit Texas in late August, and Irma, which battered Florida in September.
On Wall Street Thursday, stocks moved higher, erasing modest losses from the day before. Banks and energy companies accounted for most of the gains. Retailers also rose. Technology stocks lagged the most.