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Amid Global Slowdown, U.S. Growth Keeps Looking Better

The economy expanded at its fastest pace in more than a decade during the spring and summer, showing the U.S. has strengthened its economic footing despite increasing global uncertainty.

GDP Revision Shows Expansion at 3.9% Pace, for Best Two-Quarter Stretch in More Than a Decade

The economy expanded at its fastest pace in more than a decade during the spring and summer, showing the U.S. has strengthened its economic footing despite increasing global uncertainty.

Gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 3.9% in the third quarter, the Commerce Department said Tuesday.

The upward revision from a first estimate of 3.5% put the combined growth rate in the second and third quarters at 4.25%, affirming the best six-month pace since the second half of 2003. The output figures are inflation adjusted.

“The nation’s economic prospects are improving,” said Moody’s Analytics economist Scott Hoyt. “The divergence between the U.S. economy and that of much of the rest of the world is striking.”

While U.S. gains have been modest compared with previous expansions, domestic growth is outpacing other advanced economies. Japan’s economy slipped into a recession in the third quarter and the eurozone’s growth barely stayed positive. The rate of growth in emerging markets from China to Brazil is also slowing.

Some firms are seeing that disparity first hand.

OptiLedge LLC, a Georgia company that produces plastic devices that replace wooden pallets, is seeing better demand this year from U.S. customers, including retailers and manufacturers. And lower resin costs, thanks to falling oil prices, are supporting profits. “We’re seeing strong growth,” said President Jeff Lamb.

But the global economy is a concern for OptiLedge. A stronger dollar is cutting margins on shipments to a large Canadian customer and sales to Asia have slowed.

The upward revision to overall growth, driven by stronger consumer and business spending and a smaller drag from inventory investment, surprised economists who had expected quarterly GDP would be marked down.

The U.S. third quarter gross domestic product came in higher than expected. Tomi Kilgore joins the News Hub to discuss. Photo: Getty

The economy has grown at a 3.5% pace or better in four of the past five quarters, the one exception being the first quarter’s wintry 2.1% contraction, the worst decline on record outside of a recession.

From a year earlier, economic output expanded 2.4% in the third quarter. The rate is essentially in line with the just-above 2% growth recorded since the economy emerged from recession in the second half of 2009.

The third-quarter growth revision was supported by several factors.

Consumer spending, rising at a 2.2% pace, was better than initially estimated as businesses didn’t allow stockpiles to dwindle as much as first thought. Those factors, combined with falling gasoline prices, point to the potential for strong momentum for shoppers heading into the holidays.

Wayne Sporting Goods, in Wayne, Pa., is stocking its shelves in anticipation of a good season.

“I’m sitting on a ton of jackets” including North Face and Nike fleeces expected to be popular Christmas gifts, said owner Roger Galczenski. “You can’t sell from an empty wagon.”

The store’s fall sports season ran ahead of last year, and customers seem more confident. “If there’s something the kids want, I think parents will go for it,” he said.

Business spending on new buildings, machinery and research-and-development efforts grew more than initially estimated, and spending on residential building and improvements advanced for the second straight quarter after slowing late last year.

Sarah and Brian Treich, married earlier this year, purchased a new three-bedroom home in Glen Burnie, Md., in August. They wanted to take advantage of low mortgage rates and were enticed by the builder’s offer to cover closing costs.

“It wasn’t easy,” said the 25-year-old Mr. Treich, a software engineer. College debt made the couple nervous about extending themselves, “but we feel like with renting we’re throwing away money,” he said.

Source:   The Wall Street Journal