Economy rebounding from hurricane disruption

Although GDP growth looks to have slowed slightly in the third quarter, at least partly due to the disruption caused by Hurricanes Harvey and Irma, the surge in the ISM surveys suggests that underlying activity growth continues to strengthen. A weighted average of the two ISM indices rose to a twelve-year high in September and is consistent with GDP growth of more than 5% annualised. (See Chart.) Admittedly, the ISM surveys are probably being a little over-optimistic, and the alternative Markit PMI surveys have remained more subdued. Nonetheless, with global demand unusually strong, the 7% depreciation in the dollar this year providing a boost to exports and domestic activity benefitting from loose financial conditions, the prospects for growth remain bright.