The U.S. Commerce Department reported that the U.S. economy grew 2 percent in the third quarter – significantly stronger than the 1.3 percent growth registered in the last quarter. It is also the 13 consecutive quarters of growth in economic output since the last recession. This comes as a minor surprise as consensus from economists expected a 1.8 percent growth for the three months through to the end of September.
Consumer spending led the growth as real personal-consumption expenditure grew 2 percent compared to 1.5 percent in the second quarter. Government spending also featured heavily in this quarter’s numbers as federal government expenditures increased by 9.6 percent – the first significant contribution to growth in more than two years.
However, the drought in the Midwest did affect GDP growth as declining inventories took 0.12 percent from the headline number while falling farm inventories deducted another 0.42 percent.
The S&P500 monthly performance:
While the headline GDP figure is in an unmistakable upward trend, other signs in the economy points to a slow recovery. For example, while exports rose 5.3 percent in the second quarter, the latest report showed a 1.6 percent decline in the third quarter. This is also the first time that exports in the United States have shrank in three years – a sign that global recovery is crucial to the country’s own economic growth.
Lastly, business investment also fell as nonresidential fixed investment declined 1.3 percent in the recent quarter compared to a 3.6 percent rise in the second quarter. This represents a decrease in spending on structure and equipment by businesses as political uncertainty in Washington play a part in the economic decisions of business owners.