There are a lot of articles about the growth spurt U.S. economy experienced in the third quarter but it is not going to last. GDP increased at a 2.9 percent rate, the highest since 2014. The problem is that many of the growth comes from the strong demand of soybeans by China and surge in exports by the U.S. The U.S. is most likely to face competition soon in the market if the demand for soybeans remains high.
There are other factors apart from soybeans. Consumer spending cooled to 2.1 percent from 4.3 percent in the previous quarter, residential investment tumbled by 6.2 percent, equipment purchases declined by 2.7 percent and the growth rate of final sales to domestic purchasers increased by just 1.4 percent. If we exclude transitory effects or short-lived effects like the sudden demand and exports of soybeans, the actual growth rate would have been closer to 1.5 percent. Also, this plays in the election due to both candidates stating that they can do better and increase the growth rate of the economy if elected.
Link: http://www.cnbc.com/2016/10/28/sorry-but-the-economy-gdp-growth-spurt-is-not-going-to-last.html
It will interesting to see how consumer confidence number plays out in the near future and to see if the holiday season can provide a needed bump to keep the momentum headed in the positive direction.
ReplyDeleteThe Fed could hold off on raising interest rates if the investment components of GDP continue to drop off.
ReplyDeleteIts pretty surprising to me that soybeans could be the reason for such economic growth in a country like the USA. Just shows how diverse an economy the US is.
ReplyDeleteI find it interesting that the surge of exports provided such a strong increase in the US economy. However, I agree that this significant increase will not last unless something else is done. This topic has been very popular in recent discussions about the election and the candidates.
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