Good GDP Numbers Put U.S. at Top of a Middling Heap
Business + Economy

Good GDP Numbers Put U.S. at Top of a Middling Heap

The U.S. economy is performing better than almost any other developed economy in the world, data released Thursday confirmed. But the U.S. cannot insulate itself completely from global economic troubles, suggesting that future growth may be harder to achieve.

The Commerce Department’s preliminary data showed the U.S. GDP increased at an annualized rate of 3.5 percent in the third quarter, driven by a number of factors, including government spending, increased personal consumption, exports, and non-residential fixed investment such as commercial real estate and manufacturing equipment.

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The third quarter estimate lagged behind the second quarter’s 4.6 percent expansion, but still leaves the country on track to hit the International Monetary Fund’s expected annual growth rate of 2.2 percent. (The average is dragged down by an anomalous first quarter in which GDP declined for the first time since 2011.) The forecast is for annualized growth of just under 3 percent next year.

Compared to its trading partners, the U.S. economy appears to be booming. The IMF’s expected GDP growth rate for the Eurozone is a meager 0.8 percent for 2014, though it is expected to rise to about 1.6 percent next year. Emerging markets, including China and India, are expected to continue growing at a higher rate than the U.S. and Europe, but the IMF predicts a slowdown.

The anemic performance of the rest of the world has its benefits and its problems for the U.S. The country will be able to attract foreign investment more easily if its economy is seen as stronger than that of other major industrialized nations. The federal government will likely continue to enjoy relatively low borrowing rates, as the U.S. continues to look like a safer investment than other large countries.

However, as other countries struggle, U.S. exports begin to look more expensive to foreign buyers, which creates a drag on the U.S. economy. A 7.8 percent increase in exports helped support the healthy third quarter U.S. performance, but economists don’t expect we’ll see that again in coming GDP reports.

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Looking ahead, with growth abroad either slowing or already considerably slower than that of the U.S., it is highly unlikely that the net export deficit will continue to narrow,” Joshua Shapiro, an economist with the New York-based forecasting firm Maria Fiorini Ramirez told The Wall Street Journal. “To the contrary, some retracement of third-quarter move is likely, and therefore trade ought to weigh on growth in the fourth quarter.

The announcement came just a day after the Federal Reserve’s Federal Open Market Committee announced the end of its program intended to stimulate the U.S. economy through the continued purchase of Treasury and mortgage-backed securities. There is debate among economists over whether the U.S. economy is strong enough to continue moving forward without stimulus, particularly in a global economy that is purchasing fewer U.S. exports.

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