OCTOBER 29, 2018 – GDP ACCELERATED IN Q3; RATE INCREASE IN DECEMBER ON TRACK
Gross domestic product data last week showed the US economy grew by 3.3 percent in the third quarter, down from the 4.2 percent growth seen in Q2, but it remains a robust number. The economy has expanded at a 2.9 percent annual rate since April 2017, and GDP had been running at 2.2 percent between 2009 and mid-2017.
GDP growth is attributed to consumer and government spending. Consumer spending is being powered by plentiful jobs and the wealth effect through stock market gains. Government spending by defense outlays which grew at a 4.6 percent annualized rate in Q3. Third quarter corporate earnings were largely positive; however, sales performance was mixed, with a third of firms missing revenue projections. Home building and auto sales have slowed with rises in interest rates.
The Fed currently predicts growth rates of 2.5% in 2019, 2% in 2020 and 1.8% in 2021. As the data continues to stay strong, the Fed is expected to raise rates in December, and through 2019, to stop the economy from overheating and stirring inflation, or creating financial excess leading to asset bubbles. There is still time to lock into an interest rate swap to insulate your business from these upcoming increases.