Despite damaging hurricanes that hit the U.S. mainland and Puerto Rico, gross domestic product grew at a faster rate than forecasts had predicted, according to Investor's Business Daily.
Estimated to grow at only 2.6 percent, GDP grew at a 3 percent rate in the third quarter, following a 3.1 percent growth rate in the second quarter. This marks the first time since 2014 that there have been back-to-back growth rates above 3 percent. Despite growth hitting 3 percent on numerous occasions, it has yet to maintain that pace.
“The third quarter’s strong growth is particularly impressive because two hurricanes — Harvey and Irma — temporarily shut down major population centers in Texas and Florida in August and September,” The Wall Street Journal reported Friday. “Compared to a year earlier, output expanded 2.3%, a pickup from recent trends but roughly in line with growth this decade. Details from Friday’s report suggested underlying health and point to momentum heading into 2018.”
The news wasn't all good, however.
One of the largest parts of the economy, consumer spending, grew at only 2.4 percent compared to 3.3 percent in the previous quarter. Although GDP rose more than expected, “final sales to domestic purchasers, which strip out trade and inventories — the two most volatile components of the GDP calculation — climbed 1.8%, the slowest since early 2016, after rising 2.7 percent in prior quarter,” IBD reported.
The hurricanes likely helped GDP in some areas and hurt in others. The consumer spending numbers were helped by people replacing vehicles lost in the hurricane. The numbers, of course, don't take into account the wealth lost in those situations, so the number is a poor reflection on the strength of economic growth over time as it diverts money away from savings and investments.
“Companies are upbeat about the outlook and overseas markets are improving, which may help boost exports and contain the trade deficit,” IBD reported. The general GDP numbers, reflecting the value of goods and services produced, show strength in investment and an outgrowth of wealth creation beyond just household consumption.
The economy's continued strength may influence the Federal Reserve's policies moving forward, according to The Wall Street Journal:
“The report is also likely to nudge the Federal Reserve closer to raising a key interest rate at its meeting in December. Friday’s report showed a pickup in inflation in the summer, a development the central bank has anticipated.”