Article Summary –
The U.S. economy experienced robust growth of 3.1% from July to September, driven by strong consumer spending, export increases, and federal government investment, despite high interest rates and inflationary pressures. Consumer spending accelerated at a rate of 3.7%, and the unemployment rate remained low at 4.2%, while inflation decreased to 2.7% following multiple interest rate hikes by the Federal Reserve. Despite economic strength, voters expressed dissatisfaction with continued high prices, leading to the election of Donald Trump, whose proposed policies have raised concerns about potential inflationary effects.
WASHINGTON (AP) — The U.S. economy surged at a vibrant 3.1% annual rate from July to September, driven by strong consumer spending and rising exports, according to a government update.
Third-quarter growth in U.S. gross domestic product (GDP) — encompassing goods and services — increased from 3% in April-June, despite high interest rates, noted the Commerce Department on Dec. 19. GDP growth exceeded 2% in eight of the last nine quarters.
Consumer spending, which makes up roughly two-thirds of U.S. economic activity, grew at a 3.7% rate, the fastest since early 2023, surpassing the previous third-quarter estimate of 3.5%.
Exports rose 9.6%, while business investment increased a mere 0.8%. However, investment in equipment soared 10.8%. Federal government spending jumped 8.9%, with defense spending spiking 13.9%.
Despite the steady growth under Democratic President Joe Biden, American voters frustrated with prices 20% higher than early 2021’s surge opted for Donald Trump to return to the White House with Republican control of Congress.
Trump is set to inherit an overall healthy economy. The unemployment rate stands low at 4.2%, though higher than the April 2023 low of 3.4%. Inflation peaked at a four-decade high of 9.1% in mid-2022. Federal Reserve’s eleven interest rate hikes in 2022-2023 reduced it to 2.7% last month, still above the Fed’s 2% target, prompting a rate cut.
The president-elect pledges extensive economic policy changes, such as tax reductions, applying substantial tariffs on imports, and deporting immigrants illegally employed in the U.S., raising inflation concerns among economists.
“Economic data suggest a robust end to 2024, but we face increased policy uncertainty and potential challenges in 2025,” wrote Oren Klachkin, economist at Nationwide.
An underlying GDP category reflecting economic strength grew 3.4% annually from July through September, an improvement from previous estimates and up from 2.7% in April-June. This includes consumer spending and private investment, excluding volatile factors like exports and government spending.
The report contained positive inflation news; the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures index (PCE), rose at a 1.5% annual rate last quarter, down from 2.5% in the second quarter. Core PCE inflation, excluding food and energy prices, was 2.2%, slightly up from earlier estimates but down from 2.8% in April-June.
The Dec. 19 report was the Commerce Department’s final third-quarter GDP review. The initial October-December growth estimate will be published on Jan. 30.
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