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GDP in Q3 Showed 2% Growth as Economy Found ‘More Traction’

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The nation’s gross domestic product (GDP) rose by 2% in the third quarter, compared to second-quarter growth of 1.7%, the U.S. government reported Friday.

Personal consumption was a factor, up by 2.6% compared with 2.2% in Q2. Also higher were private inventory investment, federal spending, nonresidential fixed investment and exports, according to the Q3 GDP report from the Commerce Department.

These positives were partly offset by a drop in residential fixed investment.

Durable goods were up by 6.1% and nondurable goods increased 1.3%. In Q2, they were up by 6.8% and 1.9%, respectively. Services beat the previous quarter, rising by 2.5% compared with 1.6%.

Stuart Hoffman, chief economist at PNC’s Economics Division, had this to say: “The economy found some more traction in the third quarter as consumer spending firmed up, inventories swelled, investment in equipment continued to advance rapidly and federal government spending remained strong. Global trade was a drag on Q3 GDP as surging imports from China nullified the positive impact of overall export growth.”

Lackluster final sales were the Achilles heel of the U.S. economy, Hoffman added, “indicative of an economy still struggling to make the transition into a self-sustaining recovery.”

While most government spending was up, if not by as much as Q2, real estate and local government consumption expenditures and gross investment dropped by 0.2%.

Real gross domestic purchases increased by 3.9%, and disposable personal income rose as well, by 1.5%.

“What is critical looking forward is that the consumer will be very important if the economy is going to sustain its 2% real growth rate,” said Steve Blitz, senior economist for ITG Investment Research, in a statement.

 “Pent-up business spending is spent, so too is the government sector, and a weaker dollar will worsen the trade deficit before goods flows adjust,” Blitz added. “Fortunately, abating fears of layoffs and stock market gains have been enough to get consumers spending—sort of. Not for the big-ticket items such as homes and autos that drive economic recoveries—households are still too overly indebted and underemployed for that—but spending enough for the other stuff to keep the economy expanding at this minimal 2% growth rate in the current quarter.”

Read about last month's Q2 GDP revision on


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