U.S. Economy Sees Solid, but Disappointing, Growth in Q3

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U.S. Economy Sees Solid, but Disappointing, Growth in Q3

October 31, 2024

The U.S. economy grew at a moderate pace in the third quarter, albeit at a slightly lower-than-expected pace than was expected. Growth was largely held aloft by consumer spending that has continued to defy expectations of a slowdown.

Gross domestic product (GDP), which measures all the goods and services produced in the country, grew by an annualized rate of 2.8% in the months between July and September, according to the Commerce Department.

That is a slowdown from the second quarter's 3.0% increase. Economists polled by Dow Jones had anticipated growth of 3.1%.

The report confirms that the U.S. economy has continued its expansion, despite elevated interest rates and inflation that is still above target. However, the resiliency of consumer spending, which accounts for roughly two-thirds of all economic activity, kept the economy growing.

The personal consumption expenditures, a proxy for consumer spending, rose by 3.7% during the quarter and accounted for nearly two and a half percentage points of the 2.8% GDP gain. That is the strongest performance since the first quarter of 2023

Government spending also contributed heavily to the quarter's growth. Outlays from the Federal government jumped 9.7%, pushed higher by a nearly 15% increase in defense spending.

The trade deficit remains a drag on GDP. An 11.2% jump in imports, which subtract from GDP, offset an 8.9% increase in exports and held back growth.

One potential point of concern is that consumers have been using savings and credit to maintain their spending. The personal savings rate fell in the third quarter to 4.8%, down from 5.2% in Q2.

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