Best StartupThe U.S. economy demonstrated robust performance in the third quarter, growing at an annualized rate of 2.8%, according to the Commerce Department’s advance estimate. This solid growth comes less than a week before the upcoming election, where economic health is expected to be a key issue for voters. Driven by the fastest rise in consumer spending since early 2023 and significant business investment in equipment, the economy continues to defy forecasts of a downturn, showing resilience despite aggressive interest rate hikes from the Federal Reserve.
Consumer spending, which makes up more than two-thirds of U.S. economic activity, increased at a 3.7% pace, marking the most rapid growth since the first quarter of 2021. This uptick is fueled by a stable labor market, steady wage growth, and easing inflation, all of which have bolstered household finances. The cooling inflation rate was reflected in the personal consumption expenditures price index, excluding food and energy, which rose at a 2.2% rate—nearing the Federal Reserve’s 2% target and down from 2.8% in the previous quarter. This moderation in inflation has prompted the Fed to ease its policy, initiating a substantial half-percentage-point rate cut last month, reducing its policy rate to the 4.75%-5.00% range.
Additionally, business investment in equipment surged at an 11.1% rate, marking the fastest growth in this category since the second quarter of 2023, while government spending provided further support. However, inventory accumulation decelerated, and the trade deficit widened, resulting in both factors detracting from overall GDP growth. Residential investment, encompassing homebuilding and real estate sales, contracted for the second consecutive quarter.
Despite these factors, the economy’s growth rate remains well above the Fed’s estimate of a non-inflationary growth rate of about 1.8%, underscoring strong underlying momentum. Recent revisions also suggest the U.S. economy may have been underestimated in earlier reports, with the gap between GDP and gross domestic income (GDI) narrowing significantly.
The Bureau of Economic Analysis (BEA) noted that while it could not quantify the full impact of Hurricane Helene on third-quarter GDP, losses were estimated at $39.0 billion in privately-owned assets and $2.0 billion in state and local government assets. Nonetheless, this natural disaster had no direct effect on GDP or personal income calculations.
As Vice President Kamala Harris and former President Donald Trump enter the final stretch of their campaigns, both will likely address the mixed economic signals, particularly as voters express concerns over high living costs despite recent economic gains.
https://www.reuters.com/markets/us/us-economy-posts-solid-growth-election-eve-2024-10-30
