6 Stocks To Buy On Strong GDP Growth

Growth increased at a faster than expected pace in the third quarter, confirming expectations of a pickup in the U.S. economy. Strength in consumption expenditure and higher business investment powered this unexpectedly high increase in GDP. A rise in spending on nonresidential construction and soybean exports were other major factors responsible for the increase.

Further, there is evidence to suggest that growth will retain its momentum into the fourth quarter. Stocks related to the consumer discretionary and nonresidential fixed construction sectors make for good investment options at this point.

Strongest Showing in Two Years

According to the Commerce Department’s second estimate, GDP increased by 3.2% in the third quarter. This is a considerable improvement over the advance estimate of 2.9% and higher than the expected pace of 3%. In the second quarter, GDP increased by 1.4%. Currently, third quarter GDP is expected to have increased at the fastest pace since the third quarter of 2014.

Additionally, this was the strongest year-over-year increase experienced since 2012’s fourth quarter. Gross domestic income increased by 5.2%, lifted by an increase in household incomes and a rebound in corporate profits. GDI has increased at its sharpest pace since 2014’s second quarter.   

Consumption, Non-Residential Structural Spending Rise

Consumer expenditure, the powerhouse of GDP growth, increased by 2.8% during the third quarter. This was significantly higher than the pace of 2.1% estimated earlier. However, analysts were quick to point out that it is still lower than the pace of 4.3% experienced during the second quarter.

Additionally, investments on nonresidential construction surged, increasing by 10.1%. This is the sharpest pace witnessed since 2014’s first quarter. According to the advance estimate, the metric had increased by 5.4%. Another highlight of the report was an increase in corporate profits which advanced by 7.6%. This is markedly better than the 1.9% decline witnessed in the second quarter.

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