U.S. economic growth probably slowed in the third quarter as hurricanes Harvey and Irma restrained consumer spending and undercut construction activity, but underlying momentum likely remained strong amid robust business investment on equipment.
According to a Reuters survey of economists, gross domestic product likely increased at a 2.5 percent annual rate in the July-September period after a brisk 3.1 percent pace in the second quarter.
The Commerce Department will publish its first estimate of third-quarter GDP growth on Friday at 8:30 a.m. EDT (1230 GMT). Without the hurricane-related disruptions, economists say third-quarter GDP growth would have either matched or beat the pace set in the April-June quarter.
“Despite the temporary disruption to construction and consumer spending that will be visible in the third quarter data, the real takeaway from the report will be how resilient overall U.S. GDP growth continues to be,” said Scott Anderson, chief economist at Bank of the West in San Francisco.
“The absence of any fiscal policy change has so far neither supported nor hurt the economy and while any potential tax reform in the future might temporarily lift the growth rate to 3 percent, it will not materially alter the economy’s long-term growth prospects,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.
Hurricanes Harvey and Irma, which hurt incomes and undercut retail sales in August, likely crimped consumer spending in the third quarter. Growth in consumer spending, which accounts for more than two-thirds of the U.S. economy, is forecast slowing to below a 2.5 percent rate following a robust 3.3 percent pace in the second quarter.
Business investment on equipment is expected to have increased for a fourth straight quarter and trade to have contributed to GDP growth three quarters in a row.
Businesses likely boosted inventories in the third quarter in anticipation of strong demand. Economists estimate that inventory investment contributed as much as eight-tenths of a percentage point to third-quarter GDP growth.
Reference: Reuters
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