By Kimberly Johnson-
Hurricanes Harvey and Irma have negatively impacted on the U.S economy by restraining consumer spending and undercutting construction activity.
However, the underlying momentum remained strong owing to robust business investment on equipment, according to a Reuters survey of economists, Gross domestic product increased at a 2.5 percent annual rate in the July-September period after a brisk 3.1 percent pace in the second quarter.
The Commerce Department published its first estimate of third-quarter GDP growth on Friday at 8:30 a.m. ET. Had the hurricane not occurred, economists GDP growth would have either matched or beat the pace set in the April-June quarter.
“Despite the temporary disruption to construction and consumer spending that will be visible in the third quarter data, the real takeaway from the report will be how resilient overall U.S. GDP growth continues to be,” said Scott Anderson, chief economist at Bank of the West in San Francisco.
However, retail sales and industrial production data already showing a rebound in activity, Friday’s report will probably have no impact on monetary policy in the near term.
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The economic recovery since the 2007-2009 recession is now in its eighth year and expected to continue to be powered by a tightening labor market, which has largely maintained a strong performance that started during former President Barack Obama’s first term.
Though U.S. stocks have risen in anticipation of President Donald Trump’s tax reform, the administration has yet to enact any significant new economic policies. Trump wants big tax cuts and fewer regulations to boost annual GDP growth to 3 percent.The absence of any fiscal policy change has so far neither supported nor hurt the economy and while any potential tax reform in the future might temporarily lift the growth rate to 3 percent, it will not materially alter the economy’s long-term growth prospects,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.
Hurricanes Harvey and Irma greatly affected incomes and undercut retail sales in August, affecting spending in the third quarter. Growth in consumer spending accounts for more than two-thirds of the U.S. economy, and is predicted to slowdown to below a 2.5 percent rate following a 3.3 percent pace in the second quarter.
The storms are also expected to have affected investment in nonresidential structures like oil and gas wells, which is forecast to have contracted.
Spending on homebuilding, which was already undermined by land and labor shortages, also probably took a hit from Harvey and Irma. Spending on residential construction is forecast to have declined for a second straight quarter.
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However, continued gains in business spending on equipment, trade and an acceleration in inventory accumulation is believed to have counteracted the weak investment in residential and none residential construction investment Business investment on equipment is expected to have increased for a fourth straight quarter, with trade contributing to the total productivity of goods and services GDP greatly . Economists say inventory investment contributed as much as eight-tenths of a percentage point to third-quarter GDP growth.So, whilst the hurricane affected the American economy negatively , that impact was also balanced by by the resilience of American businessmen who invested in areas that assisted in helping re-balance the damage down.
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