US 2.5 percent GDP Growth

Surprising growth in US economy as 3.5% increase observed in third quarter

The US economy grew at a decent pace in recent time which is a lot faster than many individuals expected. According to the stats that are given by Commerce Department this Friday, the inflation was kept in check whereas the consumer spending surged up. It led to an expansion in GDP, gross domestic product, by a 3.5% annual rate while the expectation was that it may go somewhere near 3.4%.

The department also said that the PCE price index increased by 1.6% in the last quarter, which is a way of measuring the rate of inflation. Considering the expectation of the economists, it was believed that the inflation rate will reach about 2.2%.

Also, the consumer spending plays a key role in this and accounts for more than 2/3 of the us economic activities. It grew by 4% in the third quarter, which is the highest growth rate since fourth quarter of 2014. As the consumer spending got a raise, the business spending was able to come off the cliff as it faced 7.9% downfall which is biggest since first quarter of 2016.

According to the words of Scott Brown, who is chief economist working at Raymond James, “The headline was not too far from expectations, but we did get a few surprises. Consumer was stronger than we expected.” He further added that “The consumer accounts for 68 percent of overall GDP, and the consumer really drives the bus. Business to be sure, but there’s got to be consumption ant the end of it.”

Although the growth is stronger than the expectation of most of the economists, the pace of growth is still slow as compared to the last quarter. Talking about the second quarter, the GDP growth was 4.2% which is highest since 2014’s 3rd quarter. Considering the first quarter, the growth was pretty slow as the economy only saw an increase of 2.2%.

The report addresses the increasing controversy about increasing interest rates as they would slow down the economy. Also, China and U.S have put up a lot of duty on the import and export of goods this year which increases concerns about slowing down of global economy and U.S. ultimately being at the receiving end of the bad news.

However, this month, the S&P 500 fell more than 7% which is marked since the start of the October and closing at Thursday.

 

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