The Commerce Department’s Bureau of Economic Analysis has reported that the U.S. economy increased at a 2.9% annual rate in the third quarter, after a weak increase of 1.4% in the second. This is the fastest pace of growth for the gross domestic product (GDP) since the third quarter of 2014, and comes as Americans prepare to vote in the presidential election on November 8. Economists had previously expected the third quarter GDP to rise by 2.5%.
A boost in exports and a recovery in inventory investment offset recent easing in consumer spending, which rose at a 2.1% rate in the third quarter, down from the second quarter’s strong 4.3% rate. Consumer spending accounts for two-thirds of economic activity in the U.S. Last month, the Consumer Confidence Index fell from 103.5 in September to 98.6 in October.
For the first half of 2016, GDP growth averaged a lackluster 1.1%, and growth had not been above 2% since the second quarter of 2015. “This [new data] shows that the U.S. is roughly on track,” Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management in London, told Reuters. “It's a natural bounce-back following a pretty underwhelming year so far. The election campaign has probably created a degree of uncertainty that has impacted growth.”
Meanwhile, according to new ASI data, distributors reported a 3.1% increase in revenue for the third quarter and industry confidence remains consistent. The Counselor Confidence Index (which gauges the health and optimism of promotional products distributors) stood at 113 in the third quarter of 2016. This is a slight increase from 111 in the second and first quarters of 2016, though it has remained relatively unchanged over the last three years.
In the third quarter, U.S. exports increased at a 10% rate, the largest increase since the fourth quarter of 2013. Trade contributed .83% to GDP growth after adding just .18% in the second quarter. Businesses also restocked goods at a $12.6 billion rate, which added .61% to GDP, after they ran down inventories in the second quarter.
Strong economic growth indicators may support an interest rate hike next month by the Federal Reserve, which increased its interest rates last December for the first time in seven years.