US economy grows at a higher than expected 4.3% in 3rd quarter

The US economy grew at a much greater-than-expected pace in the third quarter, boosted by strong consumer spending, a delayed report released Tuesday showed. 

US gross domestic product, a sum of all goods and services produced in the sprawling US economy, expanded by 4.3% in the July-September period, the Commerce Department said in its initial reading of third-quarter growth. Economists polled by Dow Jones expect a gain of 3.2%.

Consumer spending expanded by 3.5% in the third quarter after rising 2.5% in the second quarter. Increases in exports and government spending also boosted growth, while a smaller dip in private fixed investment helped as well.

A measure of growth called real final sales to private domestic purchasers rose 3% in the quarter, up 0.1 percentage point from the prior period. Federal Reserve policymakers watch the data point closely for signs of consumer demand.

The economy moved forward during the period despite persistent signs of inflation pressures. The personal consumption expenditures price index, the Fed’s primary inflation gauge, rose 2.8% during the period, and 2.9% for core which excludes food and energy.

Both were above prior respective readings of 2.1% and 2.6% and remain well above the Fed’s 2% inflation gauge. Also, the chain-weighted price index, which accounts for changes in consumer behavior such as switching to less expensive products for pricier items, rose 3.8%, a full percentage point above the forecast.

This will be welcome news for the Trump administration, which is dealing with voter anger about the state of the economy. It will not make the public change their overall negative opinion about the economy, but it should ameliorate the general negativity.