The U.S. economy grew at a 2.1 percent annual rate over the summer, faster than first estimated, the government said Wednesday.
The July-September growth rate in the gross domestic product, the economy’s total output of goods and services, exceeded the Commerce Department’s initial estimate of a 1.9 percent annual rate.
A key reason is that businesses didn’t cut back on investment spending as much as first estimated.
“We are in sort of a Goldilocks situation, with an economy that is not too hot or too cold,” said Sung Won Sohn, a professor of economics and finance at Loyola Marymount University. “We are sailing along at a nice pace, and we should enjoy it.”
Unsurprisingly, some economists say they think growth is slowing in the current quarter.
The economy began the year with a 3.1 percent GDP rate, fueled largely by the effects of tax cuts. Now, some pessimistic forecasters foresee growth slowing to a sub-1 percent annual rate this quarter, blaming the U.S.-China trade war.
Nonetheless, the holiday shopping season is expected to be relatively healthy given solid job growth and consumer spending.
For the July-September quarter, consumer spending expanded at a solid 2.9 percent rate. That strength is expected to continue, with households enjoying rising incomes and nearly the lowest unemployment rate in a half century.
Last quarter, business investment fell at a 2.7 percent annual rate, the second consecutive decline, but residential investment rebound to an annual growth rate of 5.1 percent after six consecutive quarters of falling home investment.
Analysts attribute that rebound in part to falling mortgage rates.
For the full year, economists think GDP will expand 2.3 percent, down from the 2.9 percent GDP gain in 2018 (President Donald Trump’s first full year in office) but still well above the annual average that has prevailed since the Great Recession ended in 2009.
That increase had been fueled largely by the $1.5 trillion tax cut that Trump pushed through Congress.
As recently as several months ago, as U.S.-China trade tensions were escalating, global growth was slowing and financial markets were suffering losses, some analysts worried that the economy might be on the verge of recession.
But the Federal Reserve, which had raised rates four times in 2018, began cutting rates in July, giving a boost to interest-rate sensitive sectors of the economy.
This month, after its third rate cut of the year, the Fed signaled that it would likely keep rates unchanged in coming months unless it saw signs of significant economic weakness.
That stance isn’t likely to please Trump, who has attacked Powell and his colleagues for raising rates last year and for being slow to cut them this year.
The Fed, however, is credited by some for achieving a “soft landing” in which it’s slowed growth enough to keep the lowest unemployment rate in a half century from igniting inflation but not so much as to cause a downturn.
The Western Journal has reviewed this Associated Press story and may have altered it prior to publication to ensure that it meets our editorial standards.
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