WASHINGTON: The US economy posted its fastest growth for three years in the third quarter, according to official figures released Wednesday which portrayed a broad-based expansion as gaining momentum.
The revised figures surpassed President Donald Trump's three percent target for the second time in a row, showing that back-to-back hurricanes in late summer barely left a scratch on the world's largest economy.
Third-quarter GDP growth was revised up to 3.3 percent, three-tenths of a point higher than an initial estimate and the strongest performance since the third quarter of 2014, according to the Commerce Department.
The news comes as Republican lawmakers in Washington enter a delicate and crucial phase in efforts to adopt a sweeping overhaul of the US tax code.
The White House and senior Republican lawmakers have argued that the $1.5 trillion tax package will pay for itself by spurring economic growth -- though economists say there is little evidence to support this claim, especially in an already-growing economy.
With growth at a 3.1 percent clip in the April-June period, the six months from April to October have seen the fastest expansion since the same period in 2014. But the growth rate for the full year is likely to come in closer to 2.5 percent, in line with growth in prior years.
Third-quarter growth reflected upward revisions to business spending on computer software and transportation equipment, with investment in equipment hitting its fastest pace in three years at 10.4 percent.
State and local governments also appear to have spent more on buildings while manufacturing inventories were higher than previously estimated. That helped offset downward revisions to durable goods orders and services exports.
- Sluggish wage growth -
In congressional testimony on Wednesday, outgoing Federal Reserve Chair Janet Yellen said the expansion was "increasingly broad-based across sectors" as well as in much of the rest of the world.
She said she expected growth would continue and the job market would strengthen "somewhat further," eventually causing wages to rise after a period of sluggish growth.
In a sign of persistent weakness, however, the numbers released Wednesday showed a downward revision to wages in the second quarter of the year.
The quarterly increase in consumer spending on services, a key driver of the US economy, was also unrevised at 1.5 percent, its lowest level in four years.
The faster growth was likely to be one more factor nudging the Federal Reserve toward another interest rate increase next month -- its third of the year -- although policymakers already were headed in that direction.
Fed Governor Jerome Powell, President Trump's nominee to replace Yellen as Fed chair, said in congressional testimony on Tuesday that the case for a further rate hike in December was "coming together."
Forecasts for growth in the fourth quarter remain mixed. The Atlanta Federal Reserve Bank currently predicts growth will rise even higher in the final three months of the year to 3.4 percent, though this had not been updated to reflect Wednesday's figures.
However, Ben Herzon, senior economist at IHS Markit, said the latest third-quarter estimate still pointed to a slowdown for the October-December period.
"Unexpected strength in final sales and somewhat less of an inventory build than expected imply somewhat less of a decline in inventory investment in the fourth quarter," he said in a note to clients.
"Based on this report, we left our forecast of fourth-quarter GDP growth unchanged at 2.5 percent."