US Economy Grows By 3.5% In Third Quarter

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Gross domestic product (GDP) increased at a 3.5 per cent annualised rate also supported by a surge in inventory investment and solid government spending, the Commerce Department said on Friday in its first estimate of third-quarter GDP growth.

In addition, at an global seminar on China's macroeconomic performance jointly organized by the three organizers, 56 percent of 110 domestic economists forecasted China's economic growth will be between 6.5 percent and 6.6 percent; almost half of the economists said the private investment growth will be from 8 percent to 9.9 percent and more than 66 percent of the economists predicted the exchange rate of the yuan to the USA dollar between at 6.85 to 7.412.

Consumer spending jumped at a 4 percent rate in the July-September quarter - the fastest in about four years and topping the 3.8 percent in the prior three months.

Farmers front-loaded shipments to China before the tariffs took effect in early July, boosting second-quarter growth.

"Every time we do something great, he raises interest rates", Trump said in an interview this week with the Wall Street Journal in which he again said he viewed the Fed as the "biggest risk" facing the economy "because I think interest rates are being raised too quickly". Spending on motor vehicles and parts added just 0.09 percentage point to third-quarter GDP. There were also decreases in exports of petroleum and non-automative capital goods. Imports subtract from GDP growth. The third-quarter increase was broad-based and led by wholesale trade, particularly farm products, and manufacturing, according to the Commerce Department.

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In the third quarter, U.S. GDP grew at an annualized rate of 3.5%, according to the latest data from the BEA.

However, the drag from trade was probably offset by faster inventory accumulation by businesses stockpiling before USA import duties, on mostly in Chinese goods, came into effect. At the same time, tariff-related bottlenecks and the trade war with China are headwinds for the nation's second-longest economic expansion on record, while the weakness in business investment suggests the boost from corporate tax cuts may be wearing off. US Treasury yields fell.

Third quarter data marks the strongest back-to-back growth since 2014.

Private inventories added 2.07 percentage points to the third-quarter growth rate, a reversal from the second quarter when companies drew down on stockpiles to get ahead of retaliatory tariffs.

The annualized rate of gains in gross domestic product compared with the 3.3% median estimate in a Bloomberg survey and followed a 4.2% advance in the prior three months, according to the October 26 report from the Commerce Department. The core PCE price index rose at a 1.6% annual rate, down from a 2.1% rate in the second quarter. That was the fastest pace since the fourth quarter of 2014 and followed a 3.8 per cent pace of increase in the second quarter. So far, much of the money from the tax cuts is not going directly to investments, but instead to stock buybacks, something Democrats predicted in their opposition of the bill. "It appears most business leaders have become somewhat cautious about the future and are holding off committing to major investment plans", said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. Those exports dropped in the third quarter and could continue to drop if the tariffs remain in place.

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