The US economy has experienced remarkable growth for its third quarter. The
Commerce Department just revised its GDP estimate, withdrawing the 3.9%
growth rate that was reported in November, and correcting it with a significantly
higher growth rate of 5%.
It appears that both consumer and business expenditure turned out to be a lot
more powerful than they initially thought. The sheer speed of this growth rate is
probably the fastest that the US economy has seen in 11 years. It’s been a while
since the US has experienced such strong consecutive positive growth rates. This
can mostly be attributed to the increase in consumer expenditure, which makes
up about 70% of economic activity in the US. Consumer expenditure alone grew
at an impressive rate of 3.2%.
With the US being one of the main benefactors for falling oil prices, it’s predicted
that consumer expenditure will sustain itself for the beginning of 2015. The
sharp decline in oil prices resulted in lower gasoline prices for US residents,
which also means that the US Federal Reserve might start to increase interest
rates during 2015.
Meanwhile, other parts of the world are still struggling to keep their economies
afloat. This includes countries such as Russia, China, Japan, and vast majority of
the European areas.
On the other hand, economists agree that the GDP growth rate for the fourth
quarter isn’t expected to perform at the same level. In fact, it’s predicted to slow
down before picking itself up again for the first quarter of 2015.
Here’s the basic breakdown of the revisions made for the 5% GDP increase for
the US economy’s third quarter:
Consumer expenditure: 3.2% increase from 2.2%
Household expenditure on services: 2.5% increase from 1.2%
Fixed nonresidential investment in structures: 4.8% increase from 1.1%
Intellectual property products expenditure: 8.8% increase from 6.4%
New equipment investments: 11% increase from 10.7%
These are some of the contributing factors that make up the 5% GDP increase:
Healthcare outlays: 0.52% contribution
Expenditure on goods and services: 2.2% contribution
Fixed nonresidential investment: 1.1%
As long as the US is able to keep up its consumer spending, the prospects for
2015 seem to be glowing for now.