- Economic activity cooled further in the third quarter amid ongoing trade disputes.
- Still, the 1.9% growth exceeded consensus analyst forecasts for 1.6%.
- The results cast further doubt on the prospect that Trump would fulfill his longstanding pledge to bring US growth to or above 3% this year.
- Visit Business Insider’s homepage for more stories.
The record-long US expansion cooled further in the third quarter but kept up at a solid pace, as strong consumer activity partially offset the effects of ongoing trade disputes among the largest economies.
The Commerce Department estimated Wednesday that gross domestic product, a broad measure of all the goods and services produced in a country, rose by 1.9% from July to September. Economists had expected 1.5% growth. In the previous quarter, GDP came in at 2%.
“The data continues to show signs of a bifurcated economy,” said Michael Reynolds, the investment strategy officer at Glenmede. “The strong US consumer has continued to take the lead in driving this record-long domestic expansion forward, more than offsetting the headwinds from a slower manufacturing economy.”
Consumer spending, accounts for more than two-thirds of activity in the economy, held up at a strong 2.9%. Households have remained one of the brightest spots in an economy faced with a flurry of strains, including steep tariffs on an increasing number of products.
While the US and China stalled further trade escalations this month, companies have continued to pull back on investment as they struggle with an uncertain outlook. Businesses spent less on capital this summer, with nonresidential fixed investment falling by 3%.
“If businesses believe consumer spending is slowing they may slow their investments in plant and equipment, and eventually people,” said Gregory Leo, the chief investment officer at IDB Bank in New York. “It could become a downward spiral and lead to a recession.”
GDP was pulled down at least slightly by issues at Boeing, which has grounded its 727 Max after two fatal crashes earlier this year. A separate 40-day strike at General Motors began two weeks before the end of the third quarter, also chipping away at economic activity.
The third-quarter GDP reading, which was the second lowest of the Trump presidency, cast doubt on the prospect that the White House would fulfill its longstanding pledge to bring growth to or above 3% this year. Annual GDP has consistently registered significantly below that target throughout the president’s term, undermining a key talking point as he campaigns for re-election.
Even after a key recession warning flashed in August for the first time since the global financial crisis, the Trump administration has continued to take a far rosier stance on the economy than independent forecasters and the Federal Reserve.
“The Greatest Economy in American History!” Trump wrote on Twitter less than an hour before the GDP report was released.
The US central bank, which Trump regularly attempts to blame for any economic shortcomings, is set to announce its latest decision on borrowing costs at the end of a two-day policy meeting later Wednesday.
Policymakers on the Federal Open Market Committee have signaled they could lower interest rates for the third time since the financial crisis, a move that would bring the benchmark range to between 1.5% and 1.75%. A key measure of inflation, the price index for personal consumption expenditure, rose by 1.5% from July to September.
The monthly jobs report on Friday, which is expected to show hiring cooled further in October, could shed more light on the central bank’s next moves.
Real Life. Real News. Real Voices
Help us tell more of the stories that matterBecome a founding member
Wednesday’s GDP reading is preliminary; a second estimate for the third quarter is scheduled to be released November 27.
Subscribe to the newsletter news
We hate SPAM and promise to keep your email address safe