US GDP Growth Beats Forecasts in Q3

The US economy advanced an annualized 3.5 percent on quarter in the third quarter of 2018, beating market expectations of 3.3 percent, the advance estimate showed. It follows a 4.2 percent growth in the previous period which was the highest since the third quarter of 2014. Consumer spending rose faster and inventories rebounded. On the other hand, investment in structures fell the most in near three years, residential continued to contract and net trade made the biggest drag on growth since Q2 1985.

Personal consumption expenditure (PCE) contributed 2.69 percentage points to growth (2.57 percentage points in Q2) and rose 4 percent (3.8 percent in Q2), the biggest gain since Q4 2014. Spending rose faster for nondurable goods (5.2 percent compared to 4 percent) and services (3.2 percent compared to 3 percent) but slowed for durable goods (6.9 percent compared to 8.6 percent). 

Fixed investment made a negative contribution (-0.04 percentage points compared to +1.1 percentage points in Q2) and fell 0.3 percent after a 6.4 percent jump in Q2. Investment in structures slumped 7.9 percent after rising 14.5 percent, the biggest fall since Q4 2015 and residential investment went down for the third straight quarter (-4 percent compared to -1.3 percent). Also, investment slowed for equipment (0.4 percent compared to 4.6 percent) and intellectual property products (7.9 percent compared to 10.5 percent).

The contribution from private inventories turned positive (2.07 percentage points compared to -1.17 percentage points in Q2).

Exports fell 3.5 percent (+9.3 percent in Q2), mainly due to a decline in soybean exports to China after Beijing's tariffs took effect. Imports rose 9.1 percent, rebounding from a 0.6 percent decline in Q2, before US import tariffs take complete effect. As a result, the impact from trade was -1.78 percent, compared to +1.22 percent in Q2.

Government spending and investment added 0.56 percentage points to growth, slightly higher than 0.43 percentage points in Q2. It increased 3.3 percent, above 2.5 percent in Q2.

US GDP Growth Beats Forecasts in Q3

BEA | Joana Taborda |
10/26/2018 1:15:42 PM