The US economy grew faster than initially expected in the third quarter, revised GDP estimates from the Commerce Department showed Wednesday.
The economy expanded by 2.1% between July and September, more than the initial reading of 1.9%, and more than the 2% growth rate in the second quarter. The last time it grew at a pace of less than 2% in the final quarter of 2018.
America kicked off the year with buoyant growth of 3.1% in the first quarter, but then slowed down. Manufacturing, both in the United States and globally, was hit hard by the on-going trade war with China, which weighed exports and made materials more expensive. The trade war also has kept many companies in wait-and-see mode with respect to business investments. On top of that, the positive effects from the 2017 tax cuts, which gave the economy a boost, also tapered off this year.
Even though America’s economy is more reliant on consumer spending than on industrials, analysts have grown concerned that the manufacturing weakness could spill over into other sectors, and eventually weigh on spending. So far, this has not been the case, even though consumer confidence data in the third quarter showed that Americans have become more concerned about the trade war.
The Federal Reserve cut interest rates for the first time since the financial crisis this year, lowering rates three times so far, to ensure the expansion will keep going.
That said, holiday shopping is expected to be strong this year, before the next round of tariffs on Chinese imports are slated to hit on December 15.
“We can be thankful that the economy is still in a good place with economic growth a little better,” said Chris Rupkey, chief financial economist at MUFG. Other economic data, including jobless claims for the week ended November 23 and durable goods order for October, also looked better-than-expected on Wednesday.
Together this tells “the story that recession is nowhere to be seen and should not be on anyone’s radar in 2020,” Rupkey added.
Capital Economics lifted its GDP growth forecast for the fourth quarter to 1.5%, from 1% before.
“Overall, we’re still expecting economic growth to slow further in the near-term, but that slowdown appears to be more modest than we had initially expected,” said Capital Economics’ senior US economist Michael Pearce in a note to clients.
Correction: This article previously attributed the GDP data to the wrong government agency