Sorry, but the economy's growth spurt isn't going to last

A spotter lines up a truck before a container is loaded from a ship in the Seagirt Marine Terminal at the Port of Baltimore.
Andrew Harrer | Bloomberg | Getty Images

The U.S. economy grew in the third quarter at its fastest pace in two years, due largely to factors that are unlikely to last.

Gross domestic product increased at a 2.9 percent rate, above expectations and at the best rate since the 5 percent posted in the third quarter of 2014. The positive surprise comes as the Fed contemplates its second interest rate hike in more than 10 years, and Americans are set to elect a new president in less than two weeks.

However, a look under the hood shows that the U.S. is likely stuck in the same growth trap in which it has found itself since the Great Recession ended in mid-2009.

Many of the gains came due to a surge in soybean exports.

Soybeans? Yes, there has been a record bumper crop this year in the U.S., and strong demand from China helped fuel an export bonanza. However, that's not expected to last, and the U.S. also is likely to face competition in the market.

But there were other factors besides soybeans not to like in this report.

'Nothing here to write home about'

Consumer spending cooled to 2.1 percent from 4.3 percent in the previous quarter, residential investment tumbled by 6.2 percent, equipment purchases declined by 2.7 percent and the growth rate of final sales to domestic purchasers increased by just 1.4 percent.

"Accordingly, a reasonable case could be made that this is actually a disappointing GDP report," Paul Ashworth, chief U.S. economist at Capital Economics, said in a client note.

In addition to the soybean-led export growth, the GDP report also was aided by a 0.6 percentage point gain in inventories.

Excluding "transitory" effects, the actual growth rate would have been closer to the 1.5 percent rate of the past four quarters, even including Friday's reading, according to David Rosenberg, chief economist and strategist at Gluskin Sheff.

"In other words, nothing here to write home about," he said in his morning note.

Q3 GDP up 2.9%
Q3 GDP up 2.9%

One factor that could be keeping a lid on investment is political uncertainty. However, that doesn't explain everything and even could hint that no matter who wins, the business climate remains tenuous.

"Today's release will likely improve the perception of economic conditions in the U.S. and slightly increase the odds of a Democratic president remaining in the White House," Brian Schaitkin, senior economist at The Conference Board, said in a statement.

"It remains to be seen whether such a result will calm the nerves of hesitant executives," he added. "Regardless of the outcome of the election, the environment for investment remains weak due to a combination of higher wages and weak pricing power for firms, which have caused profits to decline during the past two years."

A separate report from the Labor Department showed compensation costs for the quarter rose 2.3 percent from the year-ago rate, compared with a 2 percent gain registered in September 2015.

Republican nominee Donald Trump released a statement saying "America can do better" than the third-quarter growth. A spokesman for Democrat Hillary Clinton said the report represents "real progress" during the Obama administration but added that "there is still more we need to do to build an economy that works for everyone, not just those at the top."