U.S. economic growth nudged up in the third quarter, the government confirmed on Friday, and the economy seems to have maintained the moderate pace of expansion as the year ended, supported by a strong labor market.
The Commerce Department, during its third estimate of third-quarter GDP, revealed that the gross domestic product increased at a 2.1% annualized rate. That was unrevised from last month’s estimate. The economy grew at a 2.0% pace in the April-June period.
The economy grew at a 2.1% rate in the last quarter instead of the 2.4% pace estimated in November, when measured from the income side. Gross domestic income (GDI) increased at a rate of 0.9% in the second quarter.
Profits were previously reported to have decreased $11.3 billion, or at a rate of 0.6% in the third quarter. After-tax profits without inventory valuation and capital consumption adjustment, which corresponds to S&P 500 profits, were revised down to show them declining $23.1 billion, or at a rate of 1.2%.
In the July-September period, the average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 2.1% rate. That was down from the previously reported 2.3% pace and an acceleration from a 1.4% growth rate in the second quarter.
MODERATE GROWTH PATH
With the lowest unemployment rate in nearly half a century supporting consumer spending, the economy appears to have maintained its moderate growth speed in the fourth quarter. The fear of recession, which gripped financial markets in the summer, have faded.
There is a boost in housing market and that’s mainly due to the Federal Reserve’s three interest rate cuts this year. The U.S. central bank last week kept rates steady and signaled borrowing costs could remain unchanged at least through 2020.
As tensions has eased between the United States and China in their 17-month trade war, manufacturing looks to be stabilizing. A turnaround in manufacturing could, however, be delayed after Boeing announced on Monday it would suspend production of its best-selling 737 MAX jetliner in January as fallout from two fatal crashes of the now-grounded aircraft drags into 2020.
In the first half, economy grew 2.6%. Growth has slowed from the 3.1% rate notched in the first three months of the year in part because of the U.S.-China trade war and as the stimulus from last year’s $1.5 trillion tax cut package fades.
From the previously reported 2.9% pace, growth in consumer spending was raised to a 3.2% rate in the third quarter. Consumer spending accounts for more than two-thirds of U.S. economic activity. Inventories rose at a $69.4 billion pace instead of the $79.8 billion rate reported last month.
Government spending growth was raised to a 1.7% rate from a 1.6% pace. Growth in residential investment was lowered to a 4.6% rate from the 5.1% pace estimated last month.