US GDP is up by 5% for 3rd Quarter

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By J Maslow

Rising GDP Components
GDP Components are Rising

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.

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