GDP jumps 3.5% in 3Q as consumers, government spending fuel economy

The U.S. economy grew a robust 3.5 percent from July through September as consumer and government spending extended the nation's economic growth, the government said Friday. The latest read is the best back-to-back quarterly growth since 2014.

The third-quarter report follows the 4.2 percent growth in the second quarter and is the last major window into the U.S. economy before the midterm elections.

GDP Now, an up-to-date tracker monitored by the Federal Feserve Bank of Atlanta, had estimated third-quarter growth of 3.6 percent. The White House expected the economy to advance approximately 3.5 percent. In addition, the Bureau of Economic Analysis left its 4.2 percent growth for the second quarter, so there were no revisions.

Although there was speculation that because of the 2017 Tax Cuts and Jobs Act, which slashed the corporate tax rate to 21 percent from 35 percent, GDP could grow as much as 5 percent each quarter, White House Council of Economic Advisors Chair Kevin Hassett dismissed that.

“We were told we’d get 3 percent growth,” he said, adding, “That’s more than double the growth rate that President Trump inherited. That’s pretty good news, right?”

Hassett also estimated that capital spending will remain around 10 percent.

“We’ve got a sustained capital spending boom, and that gives you growth, because what’s going to happen now is all those new factories are going to start producing output in Q4 and Q1 of next year,” he said.