Thursday, October 30, 2014

U.S Economy Beat Expectations with 3.5% Growth in Third Quarter

Real GDP growth remained strong in the third quarter, growing at a 3.5% seasonally adjusted annual rate according to the Bureau of Economic Analysis' preliminary estimate. The growth is stronger than anticipated given the 4.6% growth in the quarter prior. Once again, the growth was driven by consumption. Net exports also heavily contributed to third quarter gains, improving noticeably from the second to third quarter.

Consumption contributed slightly less to overall GDP growth in the third quarter, when compared to the second quarter. Nevertheless, consumer spending continued to drive economic growth in the third quarter. Its contribution to GDP was 1.2%.

Other components that positively contributed to the GDP growth, included: net exports, nonresidential fixed investments and government spending. Net exports jumped, moving from a drag the previous two quarters, to contributing 1.3% to overall growth as exports grew strongly while imports declined. The government’s 0.8% contribution to growth demonstrated improved finances for state and local governments and federal defense spending—government spending made its largest contribution to growth since 2009. Non-residential investment was largely the reason fixed investment grew, which contributed 0.7% to third quarter GDP. Taken together, the data paints the picture of a healthy and growing economy.

Inventories were the only category to drag on GDP growth, lowering growth by 0.6%. However, inventories are known to fluctuate and will likely rebound in the final quarter of 2014.

Read the BEA report.

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