U.S. GDP growth/ economic expansion/ third-quarter growth update/ consumer spending increase/ inflation trends/ WASHINGTON/ Newslooks/ J. Mansour/ Morning Edition/ The U.S. economy expanded at a 3.1% annual rate in the third quarter, surpassing earlier estimates, thanks to robust consumer spending and rising exports. Despite steady growth, inflation remains above the Federal Reserve’s target, although its preferred inflation gauge showed improvement.
U.S. Economy Grows 3.1% in Q3: Quick Looks
- GDP Growth: Third-quarter GDP revised up to 3.1% from 3.0%.
- Consumer Spending: Rose at 3.7%, the fastest pace since early 2023.
- Exports: Increased by 9.6%, contributing significantly to growth.
- Government Spending: Federal expenditures rose 8.9%, including a 13.9% defense spending surge.
- Inflation: Fed’s preferred gauge slowed to 1.5%, with core inflation at 2.2%.
- Outlook: Fed cut rates for the third time this year amid inflation progress.
U.S. Economy Grew 3.1% in 3rd Quarter, Driven by Consumer Spending
Deep Look
The U.S. economy grew at an impressive 3.1% annual rate in the third quarter of 2024, reflecting a revision upward from the Commerce Department’s earlier estimate of 3.0%. Consumer spending, a key driver of economic activity, grew at a 3.7% annual pace, marking the fastest increase since the first quarter of 2023.
This robust growth was supported by a 9.6% rise in exports and a notable 10.8% jump in business investment in equipment. Federal government spending also surged by 8.9%, driven by a 13.9% increase in defense expenditures.
Inflation and the Federal Reserve’s Response
While inflation remains above the Federal Reserve’s 2% target, it has shown considerable improvement. The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) index, increased by just 1.5% annually in Q3, a significant drop from the 2.5% pace in Q2. Core PCE inflation, which excludes volatile food and energy prices, stood at 2.2%, down from 2.8% in the previous quarter.
In response to inflation easing, the Fed cut its benchmark interest rate on Wednesday for the third time this year, signaling cautious optimism about economic stability.
Labor Market and Consumer Resilience
The labor market remains resilient despite a slight uptick in the unemployment rate, which stands at 4.2%. Employers added 227,000 jobs in November, rebounding strongly from a muted 36,000 jobs added in October due to strikes and hurricanes.
American consumers continued to power the economy, accounting for approximately two-thirds of GDP activity. Their spending grew more robustly than initially reported, reflecting confidence amid a challenging economic environment.
Political and Economic Landscape
Despite the strong economic indicators, high consumer prices, which remain 20% above pre-inflationary surge levels, shaped voter sentiment in the November elections. Dissatisfaction over inflation contributed to former President Donald Trump’s return to the White House, accompanied by Republican majorities in Congress.
Trump will inherit a generally healthy economy but faces challenges in addressing inflationary pressures and maintaining growth momentum.
Outlook
The Commerce Department’s final report for Q3 GDP paints a positive picture of economic resilience, with steady growth across key sectors and progress on inflation. The next GDP estimate for the fourth quarter, covering October through December, is scheduled for release on January 30, 2025.
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