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GDP grows at 3.5% in third quarter, fastest two-quarter growth in four years

October 26, 2018

US real gross domestic product grew at an annual rate of 3.5% in the third quarter, according to the “advance” estimate of GDP growth released today by the US Commerce Department.

Real GDP for the US increased 4.2% in the second quarter.

The deceleration in real GDP growth in the third quarter reflects a downturn in exports and a deceleration in nonresidential fixed investment. Imports increased in the third quarter after decreasing in the prior quarter. These movements were partly offset by an upturn in private inventory investment.

MarketWatch’s poll of economists had forecast third-quarter GDP would rise at a rate of 3.4%. Expansion in the last two quarters is the fastest six months of growth in four years. The economy looks like it will expand above a 3% rate in 2018, according to MarketWatch. That hasn’t happened since 2005.

Brian Schaitkin, senior economist at The Conference Board, noted a confluence of fiscal stimulus measures and elevated business and consumer confidence have helped the US economy enjoy an extended period of well-above trend growth. In 2019, however, headwinds from Federal Reserve policy, the fading influence of stimulus measures and a weaker external environment will drag growth back towards its longer-term trend.

“Robust consumption growth continues to lead the current strong growth period,” Schaitkin said in a statement. “Labor market fundamentals remain very strong with unemployment at its lowest levels since the 1960s, wage growth accelerating gradually especially among blue-collar workers and consumer confidence high and rising. However, the Federal Reserve is continuing to tighten monetary policy to combat upward inflationary pressure leading to increased financing costs for households.”


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