GDP hits 3%, crushing estimates despite hurricanes
- US gross domestic product rose faster than expected in the third quarter, showing that consumer and business spending remained strong despite the hurricanes.
- For a second quarter in a row, GDP hit 3%, President Donald Trump's stated target for growth.
- But Friday's report is an advance estimate and will be revised two more times before the end of the year.
The US economy grew faster than expected in the third quarter even after hurricanes disrupted activity in some parts of the country.
The Commerce Department on Friday said gross domestic product, the measure of all goods and services produced, increased by 3%.
Stronger consumer and business spending held up the economy last quarter. Consumer spending, which makes the biggest contribution to growth, increased by 2.4% after a 3.3% rise in the second quarter. Nonresidential fixed investment, which reflects business spending on long-term capital, rose while homebuilding subtracted from growth amid a shortage of land and of skilled workers.
This was the first overarching picture of the economy since the hurricanes Irma and Maria slammed into the Southeastern US. Economists had forecast that growth slowed from the second quarter to an annualized pace of 2.6%, according to Bloomberg.
The economy grew 3.1% in Q2, the fastest pace in two years.
So for the second time in a row, growth hit President Donald Trump's stated target of 3% growth. Friday's estimate, however, was based on incomplete data and will be revised two more times before the end of the year.
The data is still likely to keep the Federal Reserve on track to continue raising its benchmark interest rate, and economists expect another hike at its December meeting.
It also supports what many have described as a Goldilocks environment for the stock market, in which growth is strong and inflation is low.
"From an economic framework, we absolutely have reasons for the market to move higher," said Brad McMillan, the chief investment officer for Commonwealth Financial Network. "The question is not so much why would markets move higher, but why wouldn't markets move higher?"
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