Daily Management Review

Revision Of Third-Quarter Growth For US Economy Unchanged


11/28/2018




Revision Of Third-Quarter Growth For US Economy Unchanged
Despite the slowing down of the US economy in the third quarter, analysts feel that the pace of economic growth would be enough for it to achieve the 3 per cent growth target for the year as envisioned by the Donald Trump administration. There are also indications that the growth momentum could have further slowed down during the early days of the fourth quarter.
 
The US Commerce Department said on Wednesday that there was an annualized growth of 3.5 per cent in the gross domestic product for the third quarter. This is the second estimate of the Commerce Department for third-quarter GDP growth and which has been kept unchanged from the earlier estimate issued on October. The number is also well over the estimated growth potential of 2 per cent for the economy.
 
The growth in the second quarter was 4.2 per cent.
 
A downward revision to consumer spending and exports offset the faster pace of inventory accumulation by businesses and there was more spending on equipment than what was thought earlier.
 
The $1.5 trillion tax cut package which was announced by the Trump administration is spurring growth because it has supported business investment and consumer spending. The tax cuts acting as a fiscal stimulus had been announced President Donald Trump with the intention of increasing annual growth to touch 3 per cent on a sustainable basis.
 
In the third quarter, the after-tax corporate profits grew at the rate of 3.3 per cent, following a second quarter growth of 2.1 per cent, said the government on Wednesday.
 
In the third quarter, there was a growth of 4 per cent in the gross domestic income (GDI), which is another measure of economic growth. In the second quarter it was only at 0.9 per cent.
 
For the July-September period, a growth rate of 3.8 per cent was achieved for the average of GDP and GDI, which is also known as the gross domestic output and is believed to be a better way of measuring economic activity. The same number in the second quarter was 2.5 per cent.
 
However there are growing concerns about the economic growth of the country which is now in the ninth straight year of growth and the second longest ever. The Commerce Department said in another report on Wednesday that a drop in exports of soybeans, capital goods and automobiles has widened by the goods trade deficit in October.
 
According to data that was released last week, in October, there was a slowdown on the business spending on equipment and it is being predicted that the trend would continue because of drop of over 30 per cent in the Brent crude oil prices which had reached a high of over $86 a barrel in early October. Lower price means lower potential for profits and consequently reduced investment in the energy sector.
 
Moreover, the increasing interest rates in the country have also dented the housing market. Additionally, a cut in thousands of jobs from its North American workforce and a halt in the production of some of the slow selling models as announced by General Motors could also impact the domestic economy of the US.
 
(Source:www.livemint.com)






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