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Economic Watch: Growth Revised to Highest Level in 3 Years, Consumers Upbeat

Total U.S. economic activity in this year's third quarter increased more than originally estimated, according to revised numbers issued Wednesday by the Commerce Department.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
November 29, 2017
Economic Watch: Growth Revised to Highest Level in 3 Years, Consumers Upbeat

 

3 min to read


Total U.S. economic activity in the third quarter of the year increased more than originally estimated, according to revised numbers issued Wednesday by the Commerce Department.

It reported the nation’s gross domestic product (GDP) grew at an annual rate of 3.3%, beating analysts’ expectations and up from a 3% rate reported a month earlier. This is also the best pace since the second quarter of 2014 and compares to a second quarter 2017 rate of 3.1%.

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This also marked the first time this total measure of the output of goods and services has increased 3% or more for two straight quarters since 2014.

Business investment increased at a 7.3% annual rate in the third quarter, the biggest pickup for that category since the end of 2016, according to AP. However, consumer spending, which accounts for about 70% of U.S. economic output, grew at an annual pace of just 2.3%, down from 3.3% in the second quarter.

The third quarter was also when the U.S. mainland felt the effects of two devastating hurricanes while there was also a downturn in imports. In addition, there were smaller decreases in state and local government spending and residential fixed investment.

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With the GDP posting a lackluster 1.2% gain in the first quarter of the year, Lindsey Piegza, chief economist at Stifel Fixed Income, noted that overall growth is trending at 2.5% thus far for 2107, modestly above the 2.2% pace established since the end of the financial crisis. Year over year, growth continues to trend at a 2.3% pace, up slightly, however, from a 2.2% pace reported at the end of the first half of the year.

“Since April, the U.S. economy has been growing at a noticeably accelerated 3% clip relative to a more moderate 2.2% trend of the past eight years. But while growth has been more impressive as of late, taking first quarter’s weakness into account the annual growth rate for the year still remains far from robust,” she said. “Additionally, while a welcomed improvement, sustainability of the recent, more-elevated activity has yet to be solidified with much of the support stemming from pent-up demand after repeated quarters of weakness and stockpiling of goods after grossly depleting inventories.”

Consumer Confidence Soars to Highest Level since 2000

This followed a report from the day before that showed U.S. consumer confidence this month is at its highest level in 17 years. That's according to private research group The Conference Board.

Its Consumer Confidence Index, which had improved in October, increased further in November. The Index now stands at 129.5, up from 126.2 in October. The Present Situation Index increased from 152 to 153.9, while the Expectations Index rose from 109 last month to 113.3.

“Consumers’ assessment of current conditions improved moderately, while their expectations regarding the short-term outlook improved more so, driven primarily by optimism of further improvements in the labor market,” said Lynn Franco, director of economic indicators at The Conference Board. “Consumers are entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018.”

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Wells Fargo Securities noted what is better today about the report compared to 17 years ago, when consumers were also feeling very good, is that consumer confidence back in November 2000 was actually coming down, while today’s consumer confidence is still climbing.

"Not only is consumer confidence the highest [it's been] in 17 years, it is also still improving compared to what was happening in November 2000,” said Mark Vitner, senior economist at Wells Fargo Securities. 

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