The overall figure was slightly higher than many economists had been projecting, and puts the US on track to hit an average of 3 percent GDP growth for the year-a psychologically important figure that President Donald Trump has promised as a result of his economic policies.
According to the Department of Commerce, the increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures, private inventory investment, state and local government spending, Federal government spending, and nonresidential fixed investment.
Consumer spending, which accounts for more than two-thirds of total economic output, rose at a 4.0% annual rate in the third quarter, the strongest rate of growth in almost four years. Growth in consumer spending, which accounts for more than two-thirds of USA economic activity, increased at a 4.0 per cent rate in the third quarter.
Although there was speculation that because of the 2017 Tax Cuts and Jobs Act, which slashed the corporate tax rate to 21 percent from 35 percent, GDP could grow as much as 5 percent each quarter, Hassett dismissed that.
Wall Street, which is suffering from disappointing company results, with Google and Amazon in particular, in the midst of a crisis of volatility, has ignored the growth and remained in the red on Friday.
"Growth downshifted a bit in Q3 and we look for some further slowing in the quarters ahead".
"There will come a day of reckoning for the economy after the tax cut monies are all gone, but for today Washington really has something to crow about", said Chris Rupkey, chief economist at MUFG in NY.
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Trade took a major bite out of growth, dragging down GDP by 1.78 points, the worst number in 33 years.
The broadest measure of USA stocks, the S&P 500, which measures the prices of 500 of the largest corporations in the United States, fell 1.7%, ending the day below where it started the year in January.
"In the big picture, what we're trying to ascertain is: is fiscal stimulus transitory or will it help sustain economic growth longer term?"
Consumer spending compared with projections for a 3.3% advance and followed the second quarter's 3.8% gain. Business spending on equipment increased at a 0.4 per cent rate, the slowest in two years, after rising at a 4.6 per cent pace in the second quarter. It contributed 2.69 percentage points to growth. "That is why we expect the Fed to stop raising rates by the middle of next year, sooner than markets or Fed officials themselves anticipate".
On the other hand, the Trump administration is optimistic, particularly as the report showed inflation remains contained: Excluding food and energy, the Fed's preferred price index also rose at a 1.6 percent rate. Higher interest rates are pressuring the housing market, businesses are struggling to find workers and the import tariffs are increasing manufacturing costs for companies, such as Caterpillar Inc, 3M Co and Ford Motor Co.
The Congressional Budget Office points to several reasons for that: the expiration of personal income tax cuts, slower growth in federal spending, and higher interest rates and prices.
But lower exports weighed on growth, after a surge earlier in the year as firms rushed shipments to beat tariffs.
Strong domestic demand, however, sucked in imports of consumer goods and cars.