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October 27, 2017

Despite hurricanes, economy sees 3% growth in Q3

Despite Hurricanes Harvey and Irma, the economy grew 3 percent in the third quarter, according to the Commerce Department's initial estimate released Friday.

NAFCU Chief Economist and Vice President of Research Curt Long said that the department was unable to quantify the overall impact the hurricanes had on economic growth, but did note disruptions in gasoline and agriculture production and a boost in emergency services and rebuilding activities.

"Consumer spending continues to propel the economy as the labor market tightens," Long said in a NAFCU Macro Data Flash report. "However, the growth rate slowed somewhat during the quarter, possibly due to weather-related impacts." Consumer spending increased 2.4 percent during the quarter.

Personal consumption expenditure (PCE) inflation, the Fed's preferred inflation metric, rose from 0.3 percent in the second quarter to 1.5 percent in the third quarter. Meanwhile, core PCE inflation (excluding food and energy) increased from 0.9 percent to 1.3 percent.

Long said the only "sizable drag" on the economy from this estimate came from residential investment as housing starts slowed during the quarter. "Construction activity has been undermined by labor shortages and rising material costs," Long added. "Looking ahead, replacement vehicle purchases and rebuilding activities are expected to boost economic growth over the remainder of the year."

GDP grew 3.1 percent in the second quarter.