The U.S. economy unexpectedly grew during the third quarter as an increase in inventory investment and a reduced trade shortage compensated for the hurricane-related shortage in consumer spending and the drop for construction.
The third quarter gross domestic product rose at a 3.0 percent annual rate after increasing 3.1 percent pace in the second quarter, according to the Commerce Department. Although the department stated they are unable to estimate the overall impact of the hurricanes, preliminary estimates showed losses of $121.0 billion in privately owned fixed assets and $10.4 billion in government-owned fixed assets.
The economy continues to be pushed by a stronger labor market that began during former President Barack Obama’s first term. U.S. stocks continue to rise in anticipation of President Donald Trump’s tax reform. Trump pushing for increased tax cuts and decreased regulations to advance annual GDP growth by 3 percent.
Businesses accrued inventories at a $35.8 billion pace for the third quarter in expectation of intense demands. Because of this, inventory investment influenced a 0.73 percentage point to the third-quarter GDP growth.
Exports grew at a 2.3 percent rate for the third quarter and imports decreased at a 0.8 percent pace resulting in a reduced trade shortage. This added a 0.41 percentage point to GDP growth.
Both hurricanes Harvey and Irma hindered consumer spending for the third quarter. Consumer spending accounts for over two-thirds of the economy reduced to a 2.4 percent rate. The storms impacted the investment in nonresidential structures such as oil and gas wells. Spending on mining exploration, wells and shafts only grew at a 21.7 percent rate which caused spending on residential structures to fall at a 5.2 percent pace.
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Business investment on equipment increased at rate of 8.6 percent, while government investment dropped for the third straight quarter.