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.
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.