Consumers, exports give US economy muscle in the third-quarter – Reuters

 In Business

By Lucia Mutikani
| WASHINGTON

WASHINGTON The U.S. economy grew faster than initially estimated in the third quarter, notching its best performance in two years, buoyed by strong consumer spending and a surge in soybean exports.

In a separate report, U.S. home prices rose 5.5 percent in the year to September, meaning house prices overall have now fully recovered from their plunge during the 2008 financial crisis.

A third report showed U.S. consumer confidence rebounded in November to its highest level in nine years despite uncertainty surrounding the policies of President-elect Trump.

U.S. stock prices edged higher on Tuesday after the data, with the benchmark S&P 500 index .SPX now up about 6.0 percent since the Nov. 8 elections. U.S. Treasury yields ended slightly lower on Tuesday but the benchmark ten year note US10YT=RR yield has risen about 0.5 percent in the past two weeks, helping to push the U.S. dollar up to its highest levels in more than a decade against major currencies .DXY.

U.S. ECONOMIC GROWTH FASTEST SINCE 2014

U.S. gross domestic product increased at a 3.2 percent annual rate instead of the previously reported 2.9 percent pace, the Commerce Department said in its second GDP estimate on Tuesday. Economists had forecast third-quarter GDP growth being revised up to a 3.0 percent rate.

Growth was the strongest since the third quarter of 2014 and followed the second quarter’s anemic 1.4 percent pace. Output was lifted by upward revisions to business investment and home building.

Exports grew at their quickest pace since the fourth quarter of 2013, driven by a surge in soybean exports after a poor soy harvest in Argentina and Brazil. International trade contributed 0.87 percentage point to GDP growth and not 0.83 percentage point as reported last month.

Data ranging from housing to retail sales and manufacturing output also suggest the economy retained its momentum early in the fourth quarter even as exports appear to be faltering amid a reversal of the boost to growth provided by soybean exports in the third quarter.

The Atlanta Fed is currently forecasting GDP rising at a 3.6 percent rate in the fourth quarter, supporting market expectations that the Federal Reserve will raise interest rates next month.

Economic growth could also be supported next year if President-elect Donald Trump succeeds in pushing through Congress a fiscal stimulus plan that includes massive infrastructure spending and tax cuts, analysts said.

“Couple that with an increasingly enthusiastic consumer supported by stronger wage gains and the economy appears well-positioned to remain on a growth path heading into 2017,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

When measured from the income side (GDI), the economy grew at a 5.2 percent clip amid a rebound in corporate profits. That was the fastest pace of increase in gross domestic income in nearly two years and followed a 0.7 percent rate of expansion in the second quarter.

The average of GDP and GDI, which economists consider to be a more accurate measure of current economic growth and a better predictor of future output, increased at a 4.2 percent rate in the third quarter, the fastest pace in two years.

That followed a 1.1 percent rate of increase in the second quarter and likely exaggerates the economy’s strength.

CONSUMER SPENDING AND CONFIDENCE UP

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.8 percent rate in the third quarter and not the 2.1 percent pace reported last month. That was still a slowdown from the second quarter’s robust 4.3 percent pace.

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