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21 December 2017
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| US Economy (The Total Investment & Insurance Solutions) |
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.
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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. The Total Investment & Insurance Solutions
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. If
GDP hits 3 percent this quarter, it would mark the first time that has occurred
since three quarters in late 2004 and early 2005.
For the whole year, the economy is expected to grow around 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.
Mark Zandi, chief economist at Moody's Analytics, is forecasting growth
of 2.9 percent for 2018, reflecting tax cuts that he predicts will add 0.4
percentage point to GDP next year. He expects the tax cuts to add 0.2
percentage point to growth in 2019. But even with that boost, he sees GDP
slowing to a 2.2 percent rate in 2019 before slowing to 1 percent growth in
2020 as the higher interest rates drag on growth. The Total Investment & Insurance
Solutions
This forecast is in line with other analysts who see only a temporary
gain from the tax cuts. They are at odds with forecasts of the Trump
administration that the tax cuts will spur significant momentum that will lift
the economy to sustained annual GDP gains of 3 percent or better.
The 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.
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The U.S. economy is benefiting from a pickup in global growth, a healthy
job market, which supports consumer spending, and a drop in the value of the
dollar against other major currencies, which makes U.S. products less expensive
in foreign markets.
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What you need to know:
— Business investment in equipment shot up at a 10.8 percent rate, the
best showing since the third quarter of 2014.
— Consumer spending, which accounts for about 70 percent of U.S.
economic output, grew at an annual pace of 2.2 percent, a slight 0.1 percentage
point less than last month's estimate.
— Government spending and investment rose for the first time in three
quarters, with spending by state and local governments revised to a small
positive from a slight negative in the previous report.
— Housing construction fell for a second quarter, but the drop was not
as severe as previously reported.
— The 1.5 percent annual GDP gain last year was the weakest performance
in six years, since the economy contracted by 2.9 percent in 2009.
—GDP growth has averaged around 2 percent in the current recovery, which
is now in its ninth year and is the third longest in U.S. history.The Total Investment & Insurance
Solutions
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