US economy grows more than expected in Q3

The US economy grew more than expected in the third quarter, according to the first estimate released by the Commerce Department on Friday.

Gross domestic product accelerated at an annual rate of 3% in the third quarter, down from 3.1% in the second but ahead of expectations of 2.5%.

The increase in real GDP reflected positive contributions from personal consumption expenditure, private inventory investment, non-residential fixed investment, exports, and federal government spending. These increases were partly offset by negative contributions from residential fixed investment and state and local government spending.

Consumer spending rose at a 2.4% rate following a 3.3% increase in the second quarter, while non-residential investment was up 3.9%.

The Commerce Department said it couldn’t say for sure the extent to which hurricanes Irma and Harvey had affected growth in the quarter, but preliminary estimates showed the storms had caused $121bn of losses in privately-owned fixed assets and $10.4bn in government-owned fixed assets.

Paul Ashworth, chief US economist at Capital Economics, said: "GDP growth for 2017 as a whole is currently tracking at around 2.1% and, assuming we see a modest fiscal stimulus in early 2018, we expect GDP growth to accelerate to 2.5% next year, even after allowing for a more aggressive pace of monetary tightening. As the stimulus wears off and the cumulative monetary tightening begins to bit, however, 2019 could be a very different story. We expect GDP growth to slow to only 1.5%."