"Economists React to Third-Quarter GDP: ‘The U.S. Is Roughly on Track’"

From Real Time Economics:

The U.S. economy picked up in the third quarter, easing worries about a more protracted slowdown and leaving the expansion on track for another year of  unspectacular growth. Gross domestic product, a broad measure of output, expanded at a 2.9% annual rate, the Commerce Department said Friday, up from the second quarter’s 1.4% pace. That could well be enough for Federal Reserve officials to raise interest rates at their December meeting. Here are some initial reactions from economists and analysts:

“This shows that the U.S. is roughly on track. It’s a natural bounce back following a pretty underwhelming year so far. The election campaign has probably created a degree of uncertainty that has impacted growth. We’ve seen financial markets reacting to pretty much every twist and turn in the campaign, so it’s logical that there would be some feed-through to growth. But, underneath all of that, the labor market is still doing well and inflation is creeping up. It’s this underlying picture that matters more than more fickle quarterly data. There’s nothing here that will put the Federal Reserve off hiking in December.” — Luke Bartholomew, Aberdeen Asset Management

“The bigger-than-expected 2.9% annualized gain in third-quarter GDP growth confirms that the economic recovery has regained some of the momentum lost within the last year. As such, this leaves the Fed firmly on track to raise interest rates in December and a hike at next week’s FOMC meeting isn’t entirely out of the question.” —Paul Ashworth, Capital Economics

“The good GDP report solidifies the case for an increase in the federal-funds rate later this year. An increase is unlikely at the Federal Open Market Committee’s meeting next Tuesday and Wednesday, just a week before the presidential election. But an acceleration in growth in the third quarter, as well as continued improvement in the labor market and indications of higher inflation, will lead the FOMC to boost the federal funds rate by 0.25 percentage point at their meeting on Dec. 13 and 14, to a range of 0.50% to 0.75%.” —Stuart Hoffman, PNC Financial Services...

...“We reckon the leap in [soy]bean exports contributed 0.9 percentage points to growth….In short, the headline GDP number looks good but the soybean export surge will reverse in [the fourth quarter], and that’s a significant headwind. Even with decent consumption, a further rise in capex and a clear rebound in state and local government consumption, our starting assumption for the quarter is GDP growth of 2%. But the headline today will increase expectations for a December rate hike a bit further; we think the Fed will act.” —Ian Shepherdson, Pantheon Macroeconomics...MORE

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