WASHINGTON (MarketWatch) — The U.S. economy grew in the third quarter at the fastest pace in two and a half years, aided by a surge in exports and a rebound in the size of inventories companies keep on hand for sale.
The government said gross domestic product, the official scorecard for the economy, expanded at a 2.9% annual clip from July through September. That’s a marked improvement from the first half of the year when the U.S. grew just barely over 1%.
Economists surveyed by MarketWatch had predicted a 2.9% advance.
The acceleration in growth, along with a steady pace of hiring, is expected to prod the Federal Reserve to raise a key U.S. lending rate in December. Even if the central bank does act, interest rates for all kinds of goods such as mortgages and auto loans are likely to remain quite low for an extended period.
In the third quarter, the economy was buffeted again by diverging forces.
Consumers increased spending by a moderate 2.1%, exports posted the biggest increase in almost three years and businesses restocked warehouse shelves after a rare decline in inventories in the spring.
Yet higher imports, a second straight decline in how much builders spent to construct new housing and less investment in business equipment tempered results.
“Bottom line, the U.S. economic expansion remains resilient, yet unremarkable,” said Sam Bullard, senior economist at Wells Fargo Securities.
That theme is expected to carry through to the end of the year. Economists polled by MarketWatch forecast a 2.1% increase in GDP in the fourth quarter that runs from October through December.
Details in GDP report
The driving force behind the improved third-quarter performance was a 10% spike in exports, helped by a temporary boom in U.S. soybean shipments after a poor harvest in South America. Some of those gains are expected to unwind in the fourth quarter, however.
Imports also rose, but by a much smaller 2.3%. A smaller trade deficit boosts GDP.
Firms restocked warehouse shelves in another boost to GDP. The value of inventories rose by $12.6 billion in the third quarter after a $9.5 billion decline in the second quarter.
Businesses also increased investment in structures such as drilling rigs and plants by 5.4% — the largest gain in two years — but spending on equipment was weak again. It fell 2.7% to mark the fourth straight decline.
Consumer spending, which accounts for two-thirds of the economy, grew more modestly in the third quarter after a heady 4.3% gain in the spring that was viewed as unsustainably high. Consumers have powered the economy over the past few years.
Government spending, in a bit of a surprise, rose 0.5%, mostly at the federal level.
Inflation as measured by the PCE price index, meanwhile, rose at a 1.4% annual rate. “Core” inflation climbed at a 1.7% rate if the volatile food and energy categories are stripped out.