The US economy has grown at its fastest pace in two years as a huge surge in farm exports, notably soybeans, and a rebound in inventory investment offset a slowdown in consumer spending.
Economic output of the world's largest economy grew at a rate of 2.9 percent between July and September, the strongest quarterly expansion since the same period 2014, according to a first estimate released by the US Commerce Department on Friday.
The rise in US gross domestic product (GDP) was stronger than expected by analysts, who had forecast a third-quarter growth rate of 2.5 percent.
Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management in London, said the US economy was "roughly on track" after growth had reached an average of just 1.1 percent in the first half of 2016. "It's a natural bounce back following a pretty underwhelming year so far," he told the news agency Reuters.
Consumer spending still supported the economy in the third quarter, even as the pace slowed from the second quarter's robust 4.3-percent rate. Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 2.1-percent rate. Spending was held back by a decline in purchases of goods which are not meant to last long.
Farm exports drive expansion
The biggest quarterly jump in exports since late 2013 drove the surprisingly strong expansion. Exports increased by 10 percent, with the result that they contributed 0.83 percentage point to GDP growth, after adding a mere 0.18 percentage point in the April-June quarter.
Here, US soybean exports were a main driver after poor harvests in Argentina and Brazil - the world's largest soybean exporters -this summer left US producers to fill the gap. Moreover, prices for the farm commodity surged in markets due to the shortfall in South America.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the more than doubling of US soybean exports had added about one percent to US third-quarter growth. "The headline GDP number looks good but the soybean export surge will reverse in Q4, and that's a significant headwind," he told the news agency AFP.
Jim O'Sullivan, chief economist at High Frequency Economics, agreed, telling the same news agency that the "farm-led surge in exports in particular looks extreme." He added though that the Q3 figure would "reinforce the impression that the trend in growth remains strong."
Other data mixed
In the period, US businesses increased spending to restock after running down inventories in the second quarter. They accumulated inventories worth $12.6 billion, contributing 0.61 percentage point to GDP growth.
Spending on nonresidential structures, which include oil and gas wells, increased at a 5.4-percent rate in the third quarter, the fastest pace since the second quarter of 2014, after falling at a 2.1-percent pace in the second quarter.
But business spending on equipment slipped 2.7 percent, dropping for a fourth straight quarter. While the pace of decline has been ebbing as oil prices stabilize and the dollar's rally gradually fades, a strong turnaround is unlikely in the near-term.
Investment in residential construction also fell for a second straight quarter, while spending by the government bounced back.
uhe/jd (Reuters, AFP)