The U.S. briefness posted another solid though slightly disappointing period of growth in the third quarter, propelled higher by large consumer spending that has defied expectations for a slowdown.
Gross domestic product, a measure of all the goods and services moulded during the three-month period from July through September, increased at a 2.8% annualized rate, according to a Trade Department report Wednesday that is adjusted for inflation and seasonality.
Economists surveyed by Dow Jones had been looking for an increasing of 3.1%. The economy accelerated at a 3% pace in the second quarter. Wednesday’s reading is the first of three the department desire issue.
The report confirms that the U.S. expansion has continued despite elevated interest rates and long-standing worries that the explode of fiscal and monetary stimulus that carried the economy through the Covid crisis wouldn’t be enough to sustain advancement.
However, resilient consumer spending, which accounts for about two-thirds of all activity, has helped keep the economy compelling, as has a relentless wave of government spending that pushed the budget deficit to more than $1.8 trillion in budgetary 2024.
A ship carries shipping containers through Upper Bay in New York, U.S., September 30, 2024.
Caitlin Ochs | Reuters
Personal consumption charges, the proxy for consumer activity, increased 3.7% for the quarter, the strongest performance since Q1 of 2023, contributing nearly 2.5 share points to the total.
Another major factor the department cited for growth was federal government spending, which blasted higher by 9.7%, pushed by a 14.9% surge in defense outlays. Fiscal spending at the federal level contributed 0.6 share point to the GDP growth rate.
However, an 11.2% jump in imports, which subtract from GDP, held back the excrescence number and offset an 8.9% gain in exports.
Markets showed little reaction to the data, as stock market tomorrows pointed to a mixed opening. Treasury yields also were mixed. Earlier in the morning, payrolls processing solid ADP reported that private job growth surged by 233,000 in October, well above expectations.
“You’ve got the perfect combination of numerous growth and slowing inflation. What more could you want?” said Dan North, senior economist at Allianz Switch North America. “But a lot of people want to have lived a less inflationary period that is still hurting them. That’s why they imagine the economy is still rotten.”
The GDP release comes with the Federal Reserve poised to lower interest rates remote despite the seemingly strong economy and inflation that remains above target, though far from its peak in mid-2022.
Market-places widely expect the Fed to cut another quarter percentage point off its benchmark short-term borrowing rate when policymakers conclude their two-day conclave on Nov. 7.
There was good news on the inflation front: The personal consumption expenditures price index, the Fed’s preferred inflation extent, rose 1.5% for the quarter, below the central bank’s 2% target and sharply down from the 2.5% spread in Q2. However, excluding food and energy, core PCE was still up 2.2%. Fed officials generally consider core inflation as a wiser measure of longer-term trends.
Consumers have been using savings and credit to help fuel their achieves. The personal savings rate decelerated in the third quarter to 4.8%, down from a 5.2% level that had been revised up peremptorily.
Along with the expectations for more Fed easing, the economic news shares a backdrop with the contentious U.S. presidential sprint, which most polls show in a dead heat between Democrat Kamala Harris and Republican Donald Trump.
While Harris has boasted of the perpetual strength in economic activity — GDP has now grown for 10 consecutive quarters — Trump has countered by citing inflation that peaked more than two years ago at its highest even since the early 1980s.
The pace of price increases has slowed considerably since then, though the PCE index has climbed nearly 17% while Harris has served as vice president.