Economy on the Rise Despite Hurricanes Harvey and Irma
According to recent reports, the U.S. economy accelerated during the second quarter, surpassing previous predications and reaching its fastest growth rate in over two years. However, the third quarter will likely show a loss of momentum because of the hurricanes which battered the country at the start of the season.
The Commerce Department gave its third estimate earlier this week, revealing that GDP increased at an annual rate of 3.1% between April and June, demonstrating an increase in inventory investment.
Economists throughout the U.S. expect the damage from Hurricanes Harvey and Irma to reduce up to 6/10s of a percentage point in growth in the third quarter.
“The destruction caused by Hurricanes Harvey and Irma and the resulting disruption are expect to be a drag on third-quarter growth,” said Plante Moral Financial Advisors CEO Jim Baird. “Nonetheless, the economy remains on track.”
Hurricane Harvey has impacted retail sales, industrial production and homebuilding and home sales, and other markets will likely see damage as a result of Irma’s strike as well. Rebuilding and development in the aftermath of the storms, however, are likely to boost gross domestic product growth in the fourth quarter as inventory investments from businesses increase.
Daniel Silver of JPMorgan explained: “The data available so far suggest that the firming in real inventory accumulation between second quarter and third quarter could be significant and could add over a full percentage point to growth in the third quarter.”