Economy grew 3.5% in third quarter, pushing corporate profits to 6-year high, GDP shows

Bloomberg News / Landov

A lit-up U.S. economy grew 3.5% in the third quarter and generated the fastest annual increase in corporate profits since 201[ads1]2, fresh GDP figures show.

The numbers: A torrid U.S. economy blazed a 3.5% pace of growth during the summer and boosted corporate profits to the highest rate in six years, fresh government figures show.

The increase in gross domestic product – was unchanged from the economy original finding. Economists polled at MarketWatch had forecast third quarter GDP to be revised up to 3.6% annual rate.

Business profits, meanwhile, surged to new heights.

Adjusted corporate earnings before taxes rose 3.4% in the third quarter.

More notably, profits over the past 12 months have climbed at a heady 10.3% clip, the fastest increase since 2012.

What happened: Although the increase in GDP was unchanged, the revised report shows market changes in how well some segments of the economy performed.

Households and state and local governments spent less than originally reported thing. And business investment was not as weak as initially believed.

Consumer spending, the main engine of the economy, rose at a 3.6% pace instead of 4%.

The increase in state and local government spending was trimmed to 2% from 3.2%.

Businesses investment, meanwhile, was somewhat stronger than initially reported.

Investment in equipment climbed 3.5% vs. virtually no increase in the preliminary estimate. En de uitgaven op structuren zoals kantoorgebouwen en drillingrigs vielen slechts 1,7% in plaats van 8%.

The production of unsold goods, or inventories, was also stronger. They rose to a revised $ 86.6 billion annual rate vs. an initial $ 76.3 billion. Inventories add to GDP.

Exports fell to a slightly bigger 4.4% annual clip. The increase in imports was little changed at 9.2%. A larger trade deficit subtracts from GDP.

The rate of inflation was marked down a notch to 1.5%.

Big picture: Updates to GDP reports are mostly a look in the rear mirror instead of the road ahead. The economy exploded in the spring and summer, driven by tax cuts, strong consumer spending and rapid business investment. The unemployment rate also fell to a 48-year low of 3.7%.

Growth is unlikely to be as strong in the final three months of 2018. Economists predict the U.S. will expand at a 2.7% pace in the fourth quarter. Some see even slower growth.

Although the economy is still quite sound, rising U.S. Renten en lopende handelsspanningen met China hebben gedempte de outlook.

The big boost earlier this year from tax cuts and higher government spending is also starting to fade and business investment has softened. Even het hoge niveau van bedrijfswinsten heeft mislukt om mollify-beleggers te melden. Stocks have fallen sharply since hitting a record high in early October.

Market reaction: The Dow Jones Industrial Average

                                     DJIA, + 0.60%

and the S & P 500

                                     SPX, + 0.26%

were set to open higher on Wednesday in a bid for a third straight gain.

The 10-year Treasury yield

                                     TMUBMUSD10Y, + 0.21%

was unchanged at 3.06%. Yields have tumbled after recently hitting a seven-year high.

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