U.S. Outlook: Why recent GDP growth doesn’t look sustainable
Headline third-quarter GDP growth came in at a robust 3.5% after coming off of a sizzling 4.2% pace of growth in the second quarter.
For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on Oct. 26.Key observations:
- Robust consumer spending and inventory building drove the strong GDP growth last quarter.
- Residential construction spending is already contracting, dropping at a 4.0% pace in the third quarter.
- Perhaps the most convincing reason to be skeptical about continued growth at recent rates is the fact that business participation in the expansion is declining, rather than ramping up.
- We expect U.S. GDP growth to slow again in the fourth quarter to around a 2.4% pace, and continue to gradually slow in 2019.