Daily Management Review

Moderate 2.1% Growth Clocked By US Economy In Q3


Moderate 2.1% Growth Clocked By US Economy In Q3
The American economy grew at a moderate annual rate of 2.1 per cent for the third quarter, announced the United States Commerce Department on Friday.
The US economy has recently managed to dispel fears of it going into a recession and after the third quarter results, analysts and economists are confident that the economy will end the year in a strong note, buoyed by the rate cuts by the US Federal Reserve and a temporary respite in the U.S.-China trade war.
The third quarter growth met the previous estimate of the US government for the July-September quarter even though some revision in some of the components was made for the estimate. The third quarter saw a 3.2 per cent growth in consumer spending that accounts for 70 per cent of the US Gross Domestic Product (GDP). That number was driven by increased spending by consumers for personal services such as beauty care which was more than the earlier estimates of 2.9 percentage growth.
However weaker reading for business inventory restocking offset the gains made in consumer spending,
Analysts and economists now believe that the current fourth quarter could be growing at about 2 per cent and expect the growth rate top continue into the early period of 2020.
It was just a few months ago the concerns about the US economy diving into a recession were being raised from multiple quarters and the third quarter results would dispel most of those fears and concerns, even though the growth rate is lower than the 3 plus per cent promised by the US President Donald Trump.
Analysts and economists now expect the growth rate for the entire 2019 to come around 2.3 per cent compared to the 2.9 per cent growth that the economy clocked in 2018. Analysts also expect that the US economy will slow down to 1.8 per cent in 2020 as the impact of the $1.5 trillion tax cut announced by Trump in 2017 dwindles away.
However the agreement between the US and China over the phase one of the trade agreement and the decision to scale back tariffs as announced last week is also expected to drive the US economy in the current quarter and early next year. The impact of the deal announcement was felt at the stock exchanges with indices reaching new highs because of growing positive sentiment about the end of the trade US-China war and good economic numbers. For example, in November, the US economy added about 266,000 new jobs bringing the rate of unemployment at 3.5 per cent, the lowest in a half-century.
The economy has also been aided by three rate cuts by the Fed this year following four rate hikes last year,
“I think next year is shaping up to be a rather pedestrian economy,”“said Mark Zandi, chief economist at Moody’s Analytics. ”’it will be creating enough jobs to avoid a recession but still job growth will be slowing compared to this year.”