The U.S. economy grew robustly in the third quarter despite two hurricanes, propelled by steady spending from American businesses and households.
Gross domestic product, the broadest measure of goods and services made in the U.S., expanded at a 3% annual rate in July through September, the Commerce Department said Friday. Economists surveyed by The Wall Street Journal had projected a 2.7% gain.
Output expanded at 3.1% rate in the second quarter. This marks the economy’s best six-month stretch since mid-2014.
The third quarter’s strong growth is particularly impressive because two hurricanes–Harvey and Irma–temporarily shut down major population centers in Texas and Florida in August and September. The Commerce Department said in its report Friday that the storms likely suppressed business activity such as oil and gas extraction in Texas and agriculture production in Florida. But the agency added, “it is not possible to estimate the overall impact of Hurricanes Harvey and Irma on 2017 third-quarter GDP.”
The economy has achieved 3% growth in a quarter on numerous occasions during the current economic expansion, but it has failed to maintain that pace. Compared to a year earlier, output expanded 2.3%, a pickup from recent trends but roughly in line with growth this decade.
Details from Friday’s report suggested underlying health and point to momentum heading into 2018.
Consumer spending, the biggest source of economic demand in the U.S., increased at a 2.4% rate in the quarter, below the trend of recent years. Spending was likely suppressed by the storms.
Businesses continued to step up investment spending. Nonresidential fixed investment grew at a 3.9% rate in the third quarter.
Exports grew at a 2.3% pace, a weaker gain than prior quarters. Government spending fell at a 0.1% rate.
The report is also likely to nudge the Federal Reserve closer to raising a key interest rate at its meeting in December. Friday’s report showed a pickup in inflation in the summer, a development the central bank has anticipated.
The price index for personal consumption expenditures-the Fed’s preferred measure of inflation–rose 1.5% annual rate in the third quarter, up from the second quarter’s 0.3% increase. Core prices–which exclude food and energy components–increased at a 1.3% rate in the third quarter after rising 0.9% in the second quarter.
Source: Dow Jones