The U.S. economy continues to strengthen with the growth rate remaining fairly consistent from a jump earlier in the year, according to a federal report Friday.
President Donald Trump has promised to help both the business community and workers. His plan to decrease regulations and lower taxes has prompted optimism in the economy. Economic growth also appears to be trending in a good direction despite a particularly bad hurricane season in recent months.
The Gross Domestic Product (GDP) tracks the total dollar value of all goods and services produced over a specific time period. The GDP is commonly used to determine the economic performance of a country or region. The Bureau of Economic Analysis (BEA) found it increased at an annual rate of 3.0 percent in the third quarter of this year.
The GDP growth rate has struggled over the last decade following a severe economic downturn. The Great Recession was followed by an unusually prolonged recovery which still persists to a degree. Former President Barack Obama was still in office when the recovery started to finally pick up steam in the last few years. GDP growth remained a sticking point with isolated jumps.
Obama never saw economic growth reach above three percent for any of the years he was in office. But the former president did see growth above three percent during some isolated quarters. Trump touted his second-quarter numbers earlier this year as a rebuke of the last administration, but in doing so he compared yearly and quarterly growth rates.
Trump has simply not been in office long enough to know whether he can reach above three percent during an entire year. Obama, for instance, saw the growth rate in the third quarter of last year jump to 3.5 percent before falling back closer to the one percent level it was stalled at during the previous two quarters.
The BEA report reflects the advanced findings for the third quarter of this year. The report is based on source data that is incomplete or subject to further revisions. The finalized third-quarter report is scheduled to be released on Dec. 21.
Numbers Breakdown
The BEA notes that the third quarter increase in economic growth is a result of positive consumer spending and business investment. It specifically reflects positive contributions from personal consumption expenditures, private inventory investment, nonresidential fixed investment, exports, and federal government spending. Imports decreased, which reflects positively on GDP.
The BEA found in its final calculation for the second quarter that economic growth increased by a bit more at 3.1 percent. The slight slowdown in economic growth likely reflects a deceleration in consumer spending, fixed business investments, and exports. Those trends were positive, but not at the same rate they were in the second quarter.
The GDP growth for the third quarter was also partly offset by negative contributions from fixed residential investments and state government spending. Nonresidential and residential fixed investments refer to funding assets and property that cannot easily be converted into cash. Fixed investments include machinery, land, buildings, installations, vehicles, and technology.
Impact On Americans
The GDP generally has a positive impact on working Americans when when it is showing strong growth in a positive direction. This means that the economy is growing which can be good for business owners and workers. But the report also highlights some nuanced numbers that give a more precise understanding of how people are actually doing.
American consumers are now paying more for goods compared to the last quarter. The price index for gross domestic purchases increased 1.8 percent in the third quarter. The measure reflects the prices paid for goods and services purchased domestically. The second quarter only saw an increase of 0.9 percent.
Americans also saw their personal savings total $494.8 billion in the third quarter. The second quarter saw personal savings at a higher total of $545.6 billion. Personal savings as a percentage of disposable income was at 3.4 percent for the third quarter, compared with 3.8 percent in the second.
The BEA also found that personal income in current-dollars increased $113.7 billion in the third quarter. That is total income values not adjusted for inflation. The income growth rate slowed slightly from the second quarter which reached $119.1 billion. The slowdown primarily comes from personal dividend income, rental income, and wages.
The Praise and Criticism
President Trump has focused his administration on helping workers and employers through economic growth. He has looked towards regulatory and tax reform to accomplish those goals. Commerce Secretary Wilbur Ross praised the latest GDP numbers as a positive sign Trump’s agenda is working.
“This is a remarkable achievement in view of the recent hurricanes which have shattered so many lives,” Ross said in a statement. “As we work together to help those areas recover, I am confident that they will rebound stronger than ever before. And as the President’s tax cut plan is implemented, our entire economy will continue to come roaring back.”
But not everyone is convinced that the numbers are as good as they seem. The Economic Policy Institute (EPI) found that the growth rate was better than expected given the particularly bad hurricane season. But measures like the final sales to domestic purchasers grew substantially slower in the third quarter. EPI research director Josh Bivens notes the economy appears to be growing at a rate consistent with past years.
“Final sales to domestic purchasers—a measure of domestic demand growth that strips out the volatile component of inventories—grew substantially more slowly this quarter (1.8 percent), and this number seems like the more informative one about the underlying strength of the U.S. economy’s expansion: slow but almost exactly in line with the entire post-Great Recession period,” Bivens wrote. “All in all, today’s report is consistent with an economy that has steadily improved since mid-2009, with the pace of improvement too-slow but steady.”
Congressional Republicans have been working to deliver a comprehensive tax reform bill that simplifies the tax code while reducing rates. Their goal is to reduce the tax burden businesses and individuals face. The president has already been able to reduce some regulations through executive orders.
