US Economy Grows at 2.8% Pace in Q3, Slightly Below Expectations

The United States economy expanded at an annualized rate of 2.8% in the third quarter of 2024, according to the preliminary estimate released by the U.S. Bureau of Economic Analysis. This growth rate is slightly lower than the 2.9% anticipated by economists polled by Bloomberg, and it represents a decline from the 3.0% growth recorded in the second quarter.

The growth in the third quarter was driven primarily by increases in consumer spending, exports, and federal government spending. Consumer spending saw rises in both goods and services, with notable increases in other nondurable goods, such as prescription drugs, and motor vehicles and parts, particularly used light trucks. Health care services, led by outpatient services, and food services and accommodations also contributed significantly to the increase in services.

Exports increased, mainly due to a rise in goods, particularly capital goods excluding automotive. Federal government spending also saw an increase, primarily driven by defense spending. However, these gains were partly offset by a downturn in private inventory investment and a larger decrease in residential fixed investment.

Inflation indicators showed a moderate decline. The personal consumption expenditures (PCE) price index, excluding food and energy, increased by 2.2% in the third quarter, down from the 2.8% increase in the second quarter. The GDP Price Index, which tracks changes in the prices of goods and services produced domestically, increased by 1.8%, compared to a 2.4% rise in the previous quarter.

The release of these GDP figures comes as investors are closely watching the Federal Reserve‘s potential moves on interest rates. Market expectations suggest a high likelihood of a 25 basis point rate cut by the Fed in its upcoming meeting, given the robust economic growth and declining inflation.

Additional economic indicators, such as the October jobs report, are expected to provide further insights into the economic landscape. Analysts predict that the US economy will have added around 110,000 jobs in October, a decrease from the 254,000 jobs created in September.