WASHINGTON — The United States economy demonstrated a robust expansion, registering a 3.1% annual growth rate from July to September, driven by strong consumer spending and a rise in exports, according to an updated report from the government.
The third quarter’s gross domestic product (GDP) growth marked an increase from the 3% recorded in the previous quarter (April to July) and remained resilient even amid elevated interest rates, as highlighted by the Commerce Department. Over the last nine quarters, GDP growth has exceeded 2% in eight instances, showcasing a trend of steady economic performance.
Consumer spending, which constitutes approximately two-thirds of the economic activity in the U.S., increased at a 3.7% rate, representing the highest growth since early 2023 and an upward adjustment from the previously estimated pace of 3.5% for the third quarter. Additionally, exports surged by 9.6%. Although business investments grew only modestly by 0.8%, investments in equipment saw a significant increase of 10.8%. Federal government spending rose substantially by 8.9%, with defense spending alone experiencing a notable 13.9% jump.
Despite these encouraging growth metrics, American voters exhibited discontent with the economic situation under President Joe Biden. Facing persistent inflation rates approximately 20% higher since the onset of inflation in early 2021, voters opted to re-elect Donald Trump as president while granting Republicans control of both the House and Senate.
Trump will inherit an economy that appears to be generally robust. The unemployment rate, currently at 4.2%, remains low, although it is an increase from the historic low of 3.4%, which was reached in April 2023. Inflation peaked at 9.1% in mid-2022, prompting the Federal Reserve to implement eleven interest rate hikes over 2022 and 2023. As a result, inflation fell to 2.7% last month, still above the Fed’s 2% target. The central bank’s efforts to combat inflation led it to lower its benchmark interest rate for the third time this year.
The president-elect is expected to introduce significant economic policy changes, including tax cuts and imposing large tariffs on imported goods, along with initiatives targeting illegal immigration. These potential shifts raise concerns among economists about the risk of exacerbating inflationary pressures.
As noted by Oren Klachkin, an economist at Nationwide, “This week’s data indicates that the economy is likely to conclude 2024 on a positive note, which is fortunate as we brace for increased policy uncertainties and potential challenges in 2025.”
In the GDP report, a key indicator reflecting the economy’s underlying strength rose at a healthy 3.4% annual rate from July through September, an improvement from the previous estimate and up from 2.7% in the April to June quarter. This measure focuses on consumer spending and private investment while excluding fluctuating factors like exports, inventories, and government expenditures.
Furthermore, the report provided promising insights regarding inflation trends. The Federal Reserve’s preferred inflation metric, known as the personal consumption expenditures index (PCE), showed a mere 1.5% annual growth rate last quarter, down from 2.5% in the previous quarter. When excluding volatile food and energy prices, core PCE inflation was registered at 2.2%, reflecting a slight increase from earlier estimates but a decrease from 2.8% during the April to June period.
This report marked the Commerce Department’s third and final assessment of GDP for the third quarter, with the initial estimate for the October to December growth set to be released on January 30.