Economy Grew at 3 Percent Rate in July-September Quarter

(CN) — The U.S. economy grew at an annual rate of 3 percent in the third quarter, the Commerce Department said Friday, marking the first time in three years that growth has reached or bettered the 3 percent milestone for two consecutive quarters.

The July-to-September rise in the gross domestic product -- the nation's output in goods and service -- comes on the heels of a 3.1 percent rise in the second quarter. The economy was much weaker in the first quarter, when GDP grew by only 1,2 percent.

It was the strongest two-quarter showing since back-to-back gains of 4.6 percent and 5.2 percent in the second and third quarters of 2014, the government said.

In the third quarter, consumer spending declined to 2.4 percent from a brisk 3.3 percent in the second quarter.

The slowdown was offset by a strong 8.6 percent gain in business investment in equipment and an increase in business rebuilding of inventories, which added 0.7 percentage point to third quarter growth, Friday's report said.

Trade also played a hand in the good report, adding 0.4 percentage point to growth as exports grew at a 2.3 percent rate while imports fell 0.8 percent.

Meanwhile, government spending fell for a third straight quarter, dropping 0.1 percent. Residential construction fell at a 6 percent rate following a 7.3 percent rate of decline in the second quarter.

The Commerce Department report is sure to be cited by the Trump administration as an indication its pro-business policies are wielding results.

On Thursday, the GOP-controlled House passed a proposed budget that would provide for $1.5 trillion in tax cuts over the next decade. Administration officials have said the tax cuts will spur faster growth and the faster growth will erase much of the cost of the tax cuts.

Democrats have expressed skepticism about that forecast.

But on Friday, Kevin Hassett, chairman of the White House Council of Economic Advisers, doubled down on the GOP's optimism.

Hassett said the plan to slash the corporate tax rate from 35 percent to 20 percent could increase the size of the U.S. economy by $700 billion, to $1.2 trillion over a decade.

Hassett also said academic research suggests the lower rates could slash the U.S. trade gap in half, since companies would have less of an incentive to book their profits overseas.

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