US economy

US economic growth tops forecasts


US consumers continued to flex their spending muscles, shrugging off higher prices at the pump and lingering trade war uncertainties to help the world’s biggest economy post another solid quarter of growth.

Gross domestic product rose at an annualised rate of 3.5 per cent during the third quarter, an initial reading from the commerce department showed on Friday.

The figure topped Wall Street expectations of 3.3 per cent. While it is a leg down from the 4.2 per cent pace recorded during the second quarter, it remains strong by recent standards, with first-quarter growth having come in at an annual pace of just 2.2 per cent.

The third-quarter performance was once again led by consumption, which accounts for over two-thirds of the economy and grew at the fastest pace in nearly four years. Consumer spending accelerated to an 4 per cent year-on-year increase during the quarter, a step up from the 3.8 per cent rate notched up in the second quarter and confounding expectations for growth to slow to 3.3 per cent.

Government spending meanwhile rose 3.3 per cent — the most since 2016. The two gains helped offset the impact from falling exports, which fell 3.5 per cent amid the ongoing trade dispute between Washington and Beijing.

“Unsurprisingly, it was another exceptionally strong quarter for the US consumer, where the combination of tax cuts, rising wages and a tight jobs market saw spending contribute 2.7 per cent to the overall economic growth figure,” said James Smith, developed markets economist at ING.

Although separate data on Friday showed the Federal Reserve’s preferred measure of inflation cooled more than expected, Mr Smith said the latest snapshot of the US economy should keeps the central bank on track to raise interest rates one more time this year and three more times next year.

The GDP figures come just 11 days ahead of the US midterm elections, where President Donald Trump has emphasised his economic record.

They also come amid a turbulent month for the US stock market, with the main indices facing their worst month in years as rising interest rates, disappointing results from some of the biggest names in tech and industrials, fear of a slowdown in China and rising trade and geopolitical tensions sent investors scrambling for the exit.



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