Nearly a full percentage point stronger than most economists have predicted
The U.S. economy expanded at a 2.8 per cent annual rate from July through September, a surprising sign of strength. Much of the growth came from a surge in business restocking.
Overall, growth increased in the third quarter from a 2.5 per cent annual rate in the April-June period to the fastest pace in a year, the Commerce Department said on Thursday.
The third-quarter outcome was nearly a full percentage point stronger than most economists had predicted and shows the economy was picking up speed this summer. Analysts expect the shutdown will slow growth in the October-December quarter. Consumers stepped up spending on goods. But overall spending weakened to a 1.5 per cent annual rate, down from the second quarter’s 1.8 per cent pace. That’s because service spending was essentially flat, in part because of a cooler summer that lowered utility spending.
Spending by consumers is critical to growth because it drives roughly 70 per cent of economic activity. Higher taxes this year and slow wage growth have weighed on consumers’ wallets since the start of the year.
Businesses boosted their stockpiles in the third quarter. That contributed 0.8 percentage point to growth, double the amount from inventory building in the second quarter. That suggests many companies anticipated healthy spending by consumers and businesses.