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US economy grows faster than expected in third quarter

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The US economy expanded at an annual pace of 3% during the three months to the end of September, which was stronger than expected. The growth extended the robust activity reported in the previous quarter, when US GDP grew at an annual pace of 3.1%.Analysts had been expecting a sharp slowdown after back-to-back hurricanes battered several states in the quarter.But consumer spending held steady, despite a drop in homebuilding investment.Together the two quarters mark the strongest six months of economic activity for the US since 2014, the Commerce Department said.”Overall, this is a very solid performance, given the disruption caused by Hurricanes Harvey and Irma,” wrote Ian Shepherdson of Pantheon Macroeconomics.”Their net effect seems to have been smaller and shorter than we expected.” Consumer spending, which increased at a 3.3% rate in the second quarter, slowed to 2.4% growth – which was probably caused by the hurricanes. Construction spending fell, but exports and business investments in equipment and intellectual property accelerated from the previous quarter, contributing significantly to the GDP rise.The Commerce Department cautioned that its figures did not capture all the losses caused by the storms, which caused widespread closures of factories, offices and airports in states such as Florida and Texas.Its GDP estimates, for example, do not measure activity in US territories, such as Puerto Rico, which suffered some of the most severe damage.The Commerce Department estimated that storm-related damage to fixed assets, such as homes and government buildings, totalled more than $131bn (£100bn).It also said it expected the government and insurers to pay more than $100bn in insurance claims, with foreign companies accounting for more than $17.4bn.

President Donald Trump has made hitting annual GDP growth of 3% a goal, and pledged tax cuts and other policies to reach that pace or higher.On a year-on-year basis, GDP was up 2.3%, the Commerce Department said in its report, an advance figure that will be revised as more data is collected.Economists said the underlying economic strength shown in the report makes it more likely that central bankers at the US Federal Reserve will raise interest rates again by the end of the year, as expected.The price index for consumer spending, a closely-watched measure of inflation, increased at 1.3% in the third quarter, excluding food and energy.
Source: BBC