U.S. Economy Tops Expectations in the Third Quarter

By Richard Branch, Senior Economist, Dodge Data & Analytics

BEDFORD, MA - OCTOBER 27, 2017 - According to the Bureau of Economic Analysis (BEA) the advance estimate for third quarter GDP growth was 3.0% annualized, beating the consensus estimate of 2.6%. The report highlights that the U.S. economy made decent headway over the last three months, despite two major hurricanes making landfall and fire spreading through California.

Consumer spending increased by annualized 2.4% in the third quarter, slightly slower than the pace set in the previous three months, but still signaling that consumers are translating labor market gains into purchases. Spending for durable goods led the way, rising 8.3%, while non-durable goods moved 2.1% higher. Spending on services was up 1.4%.

Positive sentiments stretch beyond consumers with business investment also posting another strong quarter, increasing 3.9% on an annualized basis. The gain was led by increased investment in equipment spending (+8.6%) and intellectual property (+4.3%).

Investment figures would have been higher if not for a sizable pullback in structures. Investment in nonresidential structures fell 5.2% and residential investment dipped 6.0%. While the BEA did not quantify the effects of Hurricanes Harvey and Irma, they did note that disruptions occurred, so it seems reasonable that if not for the storms, investment in structures would have been stronger.

What the hurricanes took away, however, is likely to reappear as rebuilding efforts provide a boost to economic growth in the quarters to come. Today’s report is consistent with our view that the U.S. economy is on solid footing and poised for further gains in 2018.