Top Line Number Masks Strong Domestic Demand
October 29, 2015 | The Conference BoardEstimated reading time: Less than a minute
The U.S. Bureau of Economic Analysis today reported 1.5 percent annualized growth in real Gross Domestic Product for the third quarter of 2015. As expected, the slow growth in GDP was largely a result of slower inventory buildup. A better gauge of the trend in current economic activity is final sales of domestic products, which held quite well at 3.0 percent.
Household spending is the main engine of the U.S. economy right now with consumption spending growing at 3.2 percent and residential investment at 6.1 percent in the third quarter. The still lingering impact of the low oil prices on investment is still visible in the structures components, but overall investment in equipment recovered nicely to 5.3 percent.
Moving forward, we continue to expect U.S. households to push GDP growth only slightly beyond its long run trend which we estimate to be about 2 percent right now. In the coming year, we expect GDP growth to average about 2.5 percent, despite still downward pressure from net exports.
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