US Grows at Rate of 3.5% in Third Quarter
The US economy saw an annual growth of 3.5% in the period from July to September according to the Commerce Department.
This rate outstrips the predicted growth of 3% and follows on from the previous quarter’s growth of 4.6% and with the Federal Reserve ending its stimulus programme there are huge signs of confidence in the economy. A fall in unemployment to a six year low has also helped this as America is once more surging forward coupled with higher government spending.
“Today’s number represents a return to a healthy-looking trend. The most recent IMF forecasts suggest the US economy will grow 3.1% next year and 3.0% in 2016, and these could be revised further upwards in the coming months,” said Ben Brettell, senior economist at Hargreaves Lansdown stockbrokers.
Government spending increased due to a rise in defence spending and exports also rose at a great rate of 7.8% annually but there have been questions raised over whether America can maintain this pace of growth as important export markets, such as China and many European countries appear to be struggling themselves.
Consumption growth has been relatively low at 1.8% but many expect that to improve with economists such as Paul Ashworth, chief US economist at Capital Economics, echoing that sentiment when he says:
“Conditions are in place for a pick-up in the pace of consumption growth. Real personal disposable incomes increased by a healthy 2.7% in the third quarter and, with the prospect of further big gains in employment and the impact of the slump in energy prices, real incomes should enjoy an even bigger gain in the fourth quarter.”
The US has had a bit of a mixed bag in terms of growth over the year as the first quarter saw a retraction due to severe weather hitting manufacturing and retail but it soon bounced back and is once again on the rise. Taken together the latest two quarters are the strongest consecutive quarters of growth since the second half of 2003.
With an end to the stimulus and the unemployment rate dropping off the outlook is very optimistic however, the Fed has decided to keep interest rates at a record low of 0% for a “considerable time”, in part, because of the success they’ve had with it so far with encouraging investors but also because it may be an indicator that, although jobs are on the up, they are not where they want them to be.