U.S. economic growth slowed to 3.5 percent in the three months through September, according to preliminary estimates, as exports slowed amid President Trump’s widening trade war and the housing market cooled.
The rate of expansion, slightly higher than the 3.3 percent economists had estimated, compared with 4.2 percent in the spring quarter and was bolstered by federal and state government spending as well as consumer purchases, the Bureau of Economic Analysis said in a statement.
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Home-buying dragged on growth throughout the period, with sales of existing houses declining every month and sales of new homes dropping in September to the lowest pace since the end of the Obama administration, Ellen Zentner, an economist with the New York-based investment bank Morgan Stanley, said in a report this week.
Softer capital spending in the previous quarter had already indicated the U.S. economy might be slowing more than expected from this spring’s four-year high as Trump engaged in disputes with both allies and competitors that he says are necessary to eliminate trade imbalances and boost American manufacturing jobs.
In addition to double-digit tariffs on $250 billion of Chinese imports, Trump has threatened duties on as much as $267 billion more, accompanied by 25 percent levies on automobiles and vehicle parts.
Consumer spending, however, remained solid in the third quarter, the bureau said Friday.
“The recent employment reports have indicated strong underlying wage trends, as wage pressures have started to broaden out across industries all along the pay scale,” said Zentner, whose growth estimate matched the early results. A revised assessment will be released at the end of November.
The unemployment rate dropped in September to 3.7 percent, the lowest in almost 50 years, according to the Bureau of Labor Statistics.
“The beat goes on for the U.S. economy,” Josh Feinman, a New York-based economist with DWS Group, said before Friday’s report. “Growth continues to run above potential, labor markets are tight, and still tightening, and inflation is back near the Federal Reserve’s target.”
The National Association of Manufacturers said Friday its members are delivering on their commitment to add workers if the federal government reduced corporate taxes, as it did in last year’s GOP-led overhaul.
“With additional reforms to the tax code and a sound trade policy, we could keep this momentum going and build on the strong job and wage growth seen over the past two years,” said chief economist Chad Moutray.
