Vibrant consumer activity and improvements in the housing sector helped the economy expand at a better-than-expected annualized rate of 2 percent in the third quarter, the U.S. Commerce Department said. Friday’s report is the final GDP reading ahead of the elections on November 6.
Most of the third-quarter’s increase could be attributed to consumer spending, with real personal-consumption expenditures growing 2 percent from the 1.5 percent of the second quarter. Purchases of long-lasting goods gained 8.5 percent. Government spending also contributed to economic growth — for the first time in more than two years — by growing 9.6 percent after a 0.2 percent drop in the second quarter. Residential fixed investment grew by 14.4 percent.
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“The household side is doing better, that comes through pretty clearly,” Barclays economist Dean Maki told Bloomberg. “Housing, which was in a deep hole, is also expanding. The fact that both of these are improving is an encouraging sign.”
However, business investment was still weak. Nonresidential fixed investment fell 1.3 percent compared with a 3.6 percent gain in the second quarter. Trade was also one of the negatives, with both imports and exports falling. The drought in the Midwest also had a big impact as it resulted in a $29 billion drop in farm inventories.
GDP expanded 1.3 percent in the second quarter. Although economic output has grown for 13 consecutive quarters, the pace has been fairly slow and unemployment levels have remained high. The GDP numbers are preliminary and will be adjusted.