The party’s far from over for the economy, as GDP will show

Bloomberg News/Landov

The U.S. economy is poised to grow in 2018 at the fastest pace in 13 years.

The U.S. economy put on it’s party hat in the spring and it’s still tooting its horn loudly.

Later in the week the government is expected to report the economy grew 3% or more in the three-month period stretching from July to September.

Another vigorous gain following a 4.2% burst of growth in the second quarter would position the economy for its best performance in 13 years. The last time the U.S. posted 3% growth for a full year was in 2005.

The official scorecard for the economy, known as gross domestic product, will be released Friday. While economists polled by MarketWatch predict a 3% increase in third-quarter GDP, some estimates such as the Atlanta Federal Reserve’s “Nowcast” are closer to 4%.

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A few big wild cards are in play.

The U.S. trade deficit shrank in the second quarter, for instance, but it looks set to expand in the third quarter.

How come? Many American companies in the spring hastened to export soybeans and other goods to China and elsewhere before U.S. and retaliatory foreign tariffs kicked in. Exports have since declined.

Read: Trade deficit jumps to 6-month high as soybean shipments plunge

At the same time, imports have risen to a record high. Americans are better off than they’ve been in years and they can afford to buy more imported goods. The strong dollar

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  also makes foreign products cheaper.

Businesses, for their part, ramped up production in the summer and restocked warehouse shelves. An increase in inventories boosts GDP, but it’s a herky-jerky statistic that’s always hard to predict.

“Trade will be a significant drag [on GDP], but inventories will add to growth,” said Richard Moody, chief economist at Regions Financial.

More importantly, though, Americans kept spending. They almost certainly didn’t spend as much as they did in the spring, but they still spent a lot. Consumer spending accounts for some 70% of U.S. economic activity.

If GDP generates the biggest headlines, the real story of where the economy is headed can be seen through the monthly tally on new orders for long-lasting products. These “durable” goods include new cars, appliances, computers, furniture and such.

In any case, the economy cannot grow rapidly in the long run and generate a higher standard of living absent strong investment.

The good news is, business investment has risen at an average 8.6% annual clip in the last six quarters. And that in turn reflects strong spending by consumers who are very confident in the economy.

“Business investment is still strong,” Moody said.

In other words, it’s still party time — even if the mood on Wall Street

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 lately is not.

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