The United States economy slowed less than was expected during the third quarter as a drop related to import tariffs in exports of soybeans was offset partially by the strongest spending by consumers in close to four years. The economy remained on track to reach the White House’s target of 3% for this year.
Gross domestic product was up at an annualized rate of 3.5% supported as well by an inventory investment surge and strong government spending, said the Department of Commerce on Friday in the first estimate it has released for the GDP growth for the third quarter.
While that slowed down from a second quarter pace of 4.2%, it exceeded the growth potential of the economy, which was put by economists at 2%. However, there were some red flags to the expansion of the economy that is now in a ninth straight year, which is the second longest ever recorded.
Residential invested dropped and business spending became stagnant for a third consecutive quarter, which are signs that the boost from a tax cut of $1.5 trillion is fading and the increase of interest rates were hurting the overall housing market.
There will be a day of reckoning in the economy after the monies from the tax cut have been exhausted but for now Washington can crow, said a chief economist on Wall Street.
Economists had forecasted an expansion of the GDP of 3.3% during the third quarter. The stimulus is part of the White House administration’s measure to boost the annual growth to a sustained level of 3%.
Yet a trade war exists between Washington and Beijing as well as other trade disputes between the U.S. and other trade partners, with the slowdown last quarter mostly reflecting the retaliatory tariffs impact that Beijing imposed on exports from the U.S. including soybeans.
Shipments were front loaded by U.S. farmers to China prior to the tariffs taking effect during early July, increasing growth in the second quarter. However, since that time exports of soybeans have dropped each month which increased the trade deficit.
Other decreases existed for exports of nonautomotive capital goods and petroleum.
However, strong demand in the U.S. brought in large numbers of imported motor vehicles and consumer goods. The trade cap continues to widen chopping off GDP growth of 1.78% during the third quarter.