U.S. gross domestic product (GDP) grew at an annualized rate of 3.5% in the third quarter of 2018, per the “second” estimate released by the Bureau of Economic Analysis (BEA) yesterday. GDP remained unchanged from the “advance” estimate released in October. That’s a slowdown from 4.2% growth in the second quarter but nevertheless a substantial gain and the latest sign of stable economic productivity.
What’s Contributing to the Strong GDP?
Clearly, Trump’s policies are helping the economy. Government spending, especially in defense, has fueled a significant acceleration in economic growth since mid-2017.
Post the 2017 tax reform, corporate spending has increased significantly with U.S. companies pouring tax savings into growth initiatives. This has increased productivity and spurred demand for services of several industries.
Consumer spending, which accounts for more than two thirds of U.S. economic activity, remains strong. It jumped 4% in the third quarter, the strongest since the fourth quarter of 2014. Purchasing power has increased driven by increasing wages, lower unemployment and the new tax law that slashed income tax rates for many individuals.
Increased spending, be it government, corporate or consumer, is a key catalyst behind continued strength in GDP.
Will GDP Hit the 3% Target?
Trump administration’s business-friendly policies have kept manufacturing and non-manufacturing activities in good shape, thus boosting the economy. Lower tax rates have allowed businesses to pour more funds into production. This, in turn, has spurred demand for service providers offering staffing, consulting, business services and waste management to name a few.
But there are concerns about rising interest rates and tighter trading conditions resulting from the U.S.-China trade war, which we believe slowed down growth in the third quarter.
However, with the economy growing on average of 3.2% in the first three quarters of 2018 backed by Trump administration’s policies, we believe it is still on track to meet the annual growth target of 3%. The Congressional Budget Office expects the U.S. economy to grow 3.3 percent this year.
Below, we have mentioned four stocks from industries that are currently benefiting from sustained growth manufacturing and non-manufacturing activities and a strong economy. These stocks offer high yields along with good growth prospects.
Our Growth Style Score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the growth investing space.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Clean Harbors, Inc. (CLH - Free Report) : This waste management stock sports a Zacks Rank #1 and has a Growth Score of A. This stock has gained 19.3% year to date.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current year EPS has improved 17.8% in the past 60 days.
WNS (Holdings) Limited (WNS - Free Report) : This business services stock carries a Zacks Rank #1 and has a Growth Score of B. The stock has jumped 23.4% year to date.
The company’s expected earnings growth rate for the current year is 11.6%. The Zacks Consensus Estimate for current year EPS has improved 6.3% in the past 60 days.
BG Staffing, Inc. (BGSF - Free Report) : This staffing stock carries a Zacks Rank #2 and has a Growth Score of A. The stock has rallied a massive 55.2% year to date.
The company’s expected earnings growth rate for the current year is 68.3%. The Zacks Consensus Estimate for current year EPS has improved 4.3% in the past 60 days.
Exponent, Inc. (EXPO - Free Report) : This consulting services stock carries a Zacks Rank #2 and has a Growth Score of B. This stock has gained 43.7% year to date.
The company’s expected earnings growth rate for the current year is 24.3%. The Zacks Consensus Estimate for current year EPS has improved 3.9% in the past 60 days.
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