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Published On: Thu, Oct 30th, 2014

U.S. GDP soars 3.5% as Pentagon spending climbs to 5-year high

The Obama administration may be patting themselves on the back with the news that the GDP exceeded positive predictions and rose 3.5% during the third quarter.

On Thursday, the US Commerce Department announced that the country’s gross domestic product, or GDP, grew at a 3.5 percent annual rate for the third quarter of 2014, well beyond Bloomberg’s forecasted pace of only 3.0 percent.

photo: TaxRebate.org.uk

photo: TaxRebate.org.uk

The reason for the better-than-expected results, early reports indicate, is a spike in defense spending during Q3. The Pentagon saw its spending during the last quarter go up by 16 percent, signaling a five-year high not seen since the US was involved in wars in both Afghanistan and Iraq.

This is relative to the second quarter when real GDP gained 4.6% notes Forbes.

“Imports, which negatively impact GDP, increased. Gains were also partially offset but a decrease in private inventory investments. The slowdown in growth compared to the second quarter was due to deceleration in most measures other than federal government spending which surged to 4.6% due to a large increase in defense spending,” the article points out.

There is a slowdown, the U.S. is importing more than they are exporting, but the military spending soared with a war in Iraq and Syria, so the overall GDP climbed more than expected. (Emphasis added, The Dispatch)

“The report affirmed what was broadly believed to be the case: the economy grew at an above trend rate in recent months, extending its strong advance since early spring,” wrote Jim Baird, chief investment officer for Plante Moran Financial Advisors, in a note on the results. Adding, “While top-line growth exceeded expectations, the degree to which it was driven by likely unsustainable gains in government spending and the balance of trade takes a bit of the bloom off the rose. Stronger results in personal consumption and private investment would have been preferred.”

The Federal Reserve said Wednesday that it would end its long-running bond-purchase stimulus program and, in its policy statement, said it saw “sufficient underlying strength in the broader economy” to support its mandate to maintain low unemployment and stable pricing.

About the Author

- Writer and Co-Founder of The Global Dispatch, Brandon has been covering news, offering commentary for years, beginning professionally in 2003 on Crazed Fanboy before expanding into other blogs and sites. Appearing on several radio shows, Brandon has hosted Dispatch Radio, written his first novel (The Rise of the Templar) and completed the three years Global University program in Ministerial Studies to be a pastor. To Contact Brandon email [email protected] ATTN: BRANDON

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