U.S. Growth at Above-Forecast 3% on Consumers and Businesses

The U.S. economy expanded at a faster pace than forecast in the third quarter, indicating resilient demand from consumers and businesses even with the hit from hurricanes Harvey and Irma, Commerce Department data showed Friday.

Key Takeaways

While GDP grew more than anticipated, analysts look to another key measure to assess the true health of the economy. Final sales to domestic purchasers, which strip out trade and inventories — the two most volatile components of the GDP calculation — climbed 1.8 percent, the slowest since early 2016, after rising 2.7 percent in prior quarter.

The fallout from the hurricanes was mixed, probably depressing some figures while lifting others. The storms inflicted extensive damage on parts of Texas and Florida, though the effect is likely to be transitory as economic activity is expected to rebound amid rebuilding efforts.

Consumer spending, which accounts for about 70 percent of the economy, added 1.6 percentage point to growth last quarter. That was driven by motor vehicles, as Americans replaced cars damaged by the storms, while services spending slowed to the weakest pace since 2013. Even so, a steady job market, contained inflation and low borrowing costs are expected to provide the wherewithal for households to sustain their spending.

The first reading of GDP, the value of all goods and services produced, also showed continued strength in business investment, indicating growth is broadening out to more sources beyond household consumption. Companies are upbeat about the outlook and overseas markets are improving, which may help boost exports and contain the trade deficit.

At the same time, the details of business investment showed a mixed picture. The decline in investment in structures probably reflects the hit from Hurricane Harvey, especially on oil and gas drilling.

Residential investment remained a weak spot. Builders are up against a shortage of qualified labor and ready-to-build lots at the same time sales are being held back by a shortage of available properties that’s driving up prices.

Price data in the GDP report showed inflation picked up while still lagging behind the Federal Reserve’s 2 percent goal. Excluding food and energy, the Fed’s preferred price index — which is tied to personal spending — rose at a 1.3 percent annualized rate last quarter, following a 0.9 percent gain.

Fed policy makers can point to evidence that growth is steady enough to allow them to keep raising interest rates, with investors expecting a quarter-point increase in December.

While the economy is probably on solid footing in the ninth year of this expansion, the central bank and many economists expect GDP growth to slow beyond 2018, moving closer to 2 percent rather than the sustained 3 percent pace that the Trump administration says will happen if its tax plan is enacted.

Economist Views

“It’s hard to confidently discern the hurricane effects in this report, but the economy seems to be on pretty solid ground,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “The details are reasonably solid. Consumers stepped down a little from the second quarter but their spending still expanded at a decent pace.”

The gain in equipment investment shows “businesses may be getting a little more confident about the expansion, both here in the U.S. and abroad,” he said. Overall, the report “probably gives a little more confidence to the Fed to hike rates before year-end, but I don’t think it’s a game-changer.”

Other Details

  • Nonresidential investment — which includes spending on equipment, structures and intellectual property — increased 3.9 percent and added 0.49 percentage point to growth
  • Equipment investment jumped 8.6 percent for a fourth quarter of growth, longest streak since 2014
  • Residential investment fell at a 6 percent rate after 7.3 percent drop, worst two-quarter performance since 2010
  • Net exports added 0.41 percentage point to growth as exports rose, imports fell; inventories added 0.73 point, most since 2016
  • Government spending fell at a 0.1 percent rate; the figures reflected 1.1 percent in federal spending, driven by defense, while state and local outlays dropped 0.9 percent
  • After-tax incomes adjusted for inflation increased at a 0.6 percent annual pace, down from the previous quarter’s 3.3 percent; saving rate fell to 3.4 percent from 3.8 percent
  • GDP report is the first of three estimates for the quarter; the other two are due in November and December as more data become available

    Highlights of Third-Quarter GDP (First Estimate)

    • Gross domestic product grew at a 3% annualized rate (est. 2.6%) following a 3.1% gain in 2Q, best back-to-back quarters since 2014
    • Consumer spending, biggest part of the economy, grew 2.4% (est. 2.1%) after 3.3% in 2Q
    • Business fixed investment rose 1.5%, adding 0.25 ppt to growth; spending on nonresidential structures fell, equipment and intellectual property gained, residential dropped
    • Trade, inventories added a combined 1.14 ppt to growth
    • Commerce Dept. said it can’t estimate hurricanes’ impact on GDP; disaster losses on fixed assets, private and public, totaled about $131.4b

    Read more: http://www.bloomberg.com/news/articles/2017-10-27/u-s-growth-at-above-forecast-3-on-consumer-business-spending

    Florida sinkhole that swallowed two homes is growing, officials say

    Two more houses condemned as edge of large sinkhole collapses, pausing clean-up attempt at now 260ft-wide water-filled hole

    Officials in Florida said on Saturday a large sinkhole that swallowed two homes last month is growing.

    Pasco County officials said in a news conference that a large chunk of the edge of the hole had collapsed. Two more homes in Land OLakes, a Tampa suburb, were condemned.

    The sinkhole, which opened up on 14 July, destroyed two homes and forced the evacuation of nine people. Five homeowners were allowed to return two days later. Not all did, fearing more problems with the massive pit outside their homes.

    The hole is now about 260ft (79m) wide at its widest point. Officials are not sure what caused the destabilization, but think seismic vibrations from trucks and construction equipment around the hole could be to blame.

    Kevin Guthrie, assistant county administrator of public safety in Pasco, said widening was expected with increased activity and there was no reason to believe the hole was active.

    Dump trucks were scheduled to bring in boulders on Saturday, to try to stabilize one side of the sinkhole so a small barge could be brought in. Authorities hoped to create a boat ramp to enable work from the barge, which would float on water in the sinkhole.

    The Tampa Bay Times reported that in resuming sinkhole clean-up, contractors had begun dumping truckloads of crushed limestone and boulders into the hole in an attempt to stabilize one side.

    Guthrie said that when cleaning a sinkhole, the top priority is to be deliberate and methodical and to ensure no one gets hurt. If we have to slow down, we slow down, he said. Speed is not of the essence here.

    The clean-up would take two to three weeks, he said, barring any more problems with the edges of the hole.

    The Pasco County Commission awarded Ceres Environmental Services a $640,000 contract early last week to clean the sinkhole. Contractors began picking debris off the surface on Thursday before having to halt on Friday.

    Officials were also still waiting on results from the state department of health after testing area wells for contamination.

    Read more: https://www.theguardian.com/world/2017/aug/05/florida-sinkhole-swallowed-two-homes-growing

    Scientists reveal how the T. rex could crush bones with its terrifying teeth

    The T. rex was crushing it — bones that is.
    Image: Dean Mouhtaropoulos/Getty Images

    The Tyrannosaurus rex wasn’t one to waste its food. With the help of its powerful jaw, the dinosaur king ripped apart and gobbled up its prey’s bones, in addition to any juicier bits.

    The T. rex could chow down with nearly 8,000 pounds of force, equal to the weight of three small cars, scientists found in a new study published Wednesday in the journal Scientific Reports.

    That’s more than double the bite force of the largest living crocodile, which is the bite force champion of the modern era.

    That’s not all. The tips of the T. rex’s long conical teeth could generate a whopping 431,000 pounds per square inch of bone-crushing tooth pressure, according to the study.

    T. rex jaw muscles that helped it generate 8,000-pound bite forces.

    Image: florida state university

    In other words, a bite from a T. rex could shatter bones like a “.45-caliber bullet with a mushroom head,” paleontologist Gregory Erickson, the study’s co-author and a curator at Florida State University’s Biological Science Museum, told the Washington Post.

    Scientists have long known that the T. rex could eat bones, as shown by fragments found in fossilized dinosaur dung. But they didn’t exactly know how. While this bone-pulverizing ability is seen in living meat-eating mammals like wolves and hyenas, it’s unusual for reptiles, which don’t have the teeth needed to strip prey down to the marrow.

    The T. rex’s terrifying teeth gave it a major advantage over other prehistoric reptiles.

    “It was this bone-crunching acumen that helped T. rex to more fully exploit the carcasses of large horned-dinosaurs and duck-billed hadrosaurids whose bones, rich in mineral salts and marrow, were unavailable to smaller, less equipped carnivorous dinosaurs, Paul Gignac, a study co-author and an assistant professor at Oklahoma State University Center for Health Sciences, said in a press release.

    Triceratops pelvis bearing nearly 80 T. rex bite marks.

    Image: florida state university

    For the study, Gignac and Erickson modeled and tested how the jaw muscles of living crocodiles, which are close relatives of dinosaurs, contributed to their bite force. They next compared the results with those of birds the modern-day dinosaur and produced a model for the T. rex.

    But bite force alone didn’t explain how the T. rex could puncture or smash through bones. Their teeth also played an important role.

    “It is like assuming a 600-horsepower engine guarantees speed,” Erickson said in a press release. “In a Ferrari, sure, but not for a dump truck.”

    The two paleontologists sought to understand how the ancient reptile’s bite force was transmitted through the teeth, a measurement they called tooth pressure. They did so by calculating the pressure exerted on bones caught between the dinosaur’s teeth.

    The authors said their study is the first to examine the pressure exerted by dinosaur tooth formations.

    Read more: http://mashable.com/2017/05/17/t-rex-terrifying-teeth-bones/