The U.S. economy exceeded expectations in the third quarter with upward revisions to consumer spending and exports boosting the GDP growth rate from July to September. According to the final estimate from the Bureau of Economic Analysis, GDP increased by 3.1 percent, surpassing initial projections of 2.8 percent and slightly up from the second-quarter reading of 3 percent.
The update reflected increases in real consumer spending, with goods and services rising by 5.6 percent and 2.8 percent, respectively. Exports also saw a significant advance of close to 10 percent. Government outlays contributed over one-quarter to the final GDP estimate, growing by more than 5 percent.
On the inflation front, the Federal Reserve’s preferred measure, Personal Consumption Expenditure (PCE) inflation, slowed to 1.5 percent in the third quarter. Core PCE inflation, excluding volatile energy and food categories, eased to 2.2 percent from 2.8 percent.
Federal Reserve Chair Jerome Powell highlighted the economy’s strength following the December policy meeting, stating that the U.S. economy is outperforming its global peer group.
Looking ahead to the fourth quarter, forecasts vary. The Federal Reserve Bank of Atlanta’s GDPNow Model anticipates 3.2 percent growth, while the New York Fed’s Staff Nowcast predicts a 1.9 percent expansion. The St. Louis Fed’s Real GDP Nowcast suggests a 1.3 percent increase in the October–December period.
Economic observers note that the U.S. economy continues to surpass other developed nations, driven in part by higher spending on research and development (R&D). The IMF projects domestic growth of 2.8 percent in 2024 and 2.2 percent in 2025, outpacing growth in the Euro Area, Japan, and the UK.
With the potential for lower corporate tax rates and reduced regulations under the incoming administration, growth prospects may be even better than current estimates. Data shows that the U.S. outspent Japan and the UK on R&D in 2022.
In other economic news, initial jobless claims fell, manufacturing weakened, and U.S. stocks looked to rebound after a recent selloff. Treasury yields continued to climb, and the U.S. dollar index slipped below 108.00 but remained up year-to-date. Could you please rephrase that?
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