Third-Quarter GDP Growth Not as Good as It Seems
Many will point to recently released advanced third-quarter U.S. Gross Domestic Product (GDP) results as proof that the U.S. economy is getting better. So good in fact that the Federal Reserve will have no choice but to raise interest rates in December or early January.
The U.S. economy expanded at a faster pace than expected in the third quarter by advancing 2.9%. This comes after a disappointing first half of the year in which the GDP was up just 0.8% in the first quarter and 1.4% in the second.1
But there’s more to the third-quarter results than meets the eye. On the plus side, inventories and exports added significantly to the 2.9% growth in GDP, contributing 0.61% and 1.17% respectively. That’s more than half of the total number.
On the other hand, consumer spending, which is typically responsible for 70% of GDP, was disappointing, down more than half from the second-quarter advanced GDP reading.
On top of that, fixed investment, which is better known as capital spending, was down for the fourth consecutive quarter. This never happens outside of a recession.
Soybean Exports Help Drive U.S Economy
But dig a little deeper and even the so-called good data is not as encouraging as it appears to be. For example, third-quarter exports were responsible for 1.17% of the 2.9% advance. But, the main driver of that growth was soybeans, responsible for just under a third, or 0.9% of third-quarter GDP growth.
U.S. soybeans were in great demand in the third quarter after Argentina and Brazil, the world’s largest soybean exporters, experienced poor harvests. For the world’s biggest economy, the economic impact of soybeans is most likely a one-time event. After all, the harvest in Argentina and Brazil will rebound. When it does, there will be less demand for soybeans from the U.S.
The advanced third-quarter GDP numbers, while on the surface decent, do not point to a growing, sustainable trend. In fact, chances are good U.S. GDP numbers will reverse in the coming quarters. If you remove soybean exports, inventory build, and contributions from Obamacare, the U.S. economy grew by just 0.9% in the third quarter.
Learn-To-Trade.com, Toronto’s Leader in Stock Market Trading Courses
Learn-To-Trade.com is the leading and oldest provider of stock market trading courses in Canada. Led by licensed, industry professionals, the experts at Learn-To-Trade.com can help investors confidently manage their portfolio and make consistently profitable returns.
That’s because investors can make money when the markets are going up, down, or sideways. They just need to have a broad understanding of proven trading strategies that can turn profits no matter what the markets are doing.
Through Learn-To-Trade.com’s stock market trading course investors will learn how to read stock charts, about fundamental and technical analysis, about risk management, and about capital preservation. They will also learn about a number of investing strategies, including stock options, stock index trading, futures trading, commodities trading, and FOREX trading.
Learn-To-Trade.com also has a unique Lifetime Membership that allows you to re-attend any part of the program as often as you’d like.
To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at email@example.com.
- “Gross Domestic Product: Third Quarter 2016 (Advance Estimate),” U.S. Department of Commerce, last accessed October 27, 2016; https://www.bea.gov/newsreleases/national/gdp/2016/gdp3q16_adv.htm.
Latest posts by George Karpouzis (see all)
- Rebounding Canadian Economy Points to Even More Rate Hikes in 2018 - July 26, 2018
- As Fears of a Global Trade War Ramps Up, Investors Look for Best Places to Park Their Money - July 19, 2018
- More Than 1,000 Cryptocurrenices Have Failed in 2018 and Most Investors Don’t Understand the Risks - July 12, 2018