Article Summary –
The American economy grew at an annual rate of 3.1% in the third quarter, driven by strong consumer spending, a rise in exports, and increased government spending, although business investment lagged. Despite the economic growth and a decrease in inflation due to Federal Reserve interest rate hikes, American voters remained discontented with high prices and elected Donald Trump, who plans to implement significant economic policy changes such as tax cuts, tariffs, and immigration measures, which economists fear may increase inflation. The Federal Reserve’s preferred inflation measure showed a positive trend, with the core personal consumption expenditures index rising by just 1.5% in the last quarter, indicating a potential stabilization of inflation as the economy is projected to end 2024 on a solid note.
WASHINGTON (AP) — The American economy expanded at a robust 3.1% annual rate from July to September, boosted by strong consumer spending and a rise in exports, according to a revised government report.
U.S. GDP growth accelerated from the April-June rate of 3% and remained strong despite high interest rates, the Commerce Department said on Dec. 19. GDP growth has exceeded 2% in eight of the previous nine quarters.
Consumer spending, which represents about two-thirds of U.S. economic activity, grew at a 3.7% pace, the fastest since early 2023 and an increase from the prior estimate of 3.5%.
Exports jumped 9.6%, and business investment grew a modest 0.8%, with equipment investment rising 10.8%. Government spending climbed 8.9%, highlighted by a 13.9% increase in defense spending.
Despite the growth, American voters were dissatisfied under Democratic President Joe Biden, leading to Donald Trump’s return to the White House with Republican majorities in Congress.
Trump will oversee an overall healthy economy. The unemployment rate is at 4.2%, up from the 53-year low of 3.4% in April 2023. Inflation, which peaked at 9.1% in mid-2022, decreased to 2.7% due to interest rate hikes by the Federal Reserve, though it remains above the Fed’s 2% target.
The president-elect has vowed major policy changes, including tax cuts, significant tariffs on foreign goods, and deporting illegal immigrants. Economists warn these could increase inflation.
“This week’s data show the economy is on track to end 2024 solidly, which is fortunate given the policy uncertainty and potential challenges in 2025,” commented Oren Klachkin, an economist at Nationwide.
A GDP measure indicating underlying economic strength rose at a 3.4% annual rate from July through September, improved from earlier estimates and up from 2.7% in April-June. This measure includes consumer spending and private investment, excluding volatile elements like exports and government spending.
Encouraging inflation news was reported. The Federal Reserve’s preferred inflation gauge, the PCE index, increased by only 1.5% annually last quarter, down from 2.5% in the second quarter. Core PCE inflation, which excludes food and energy prices, was at 2.2%, slightly up from the previous estimate but lower than 2.8% in April-June.
The Dec. 19 report was the Commerce Department’s final third-quarter GDP look. Initial estimates for October-December growth are due on Jan. 30.
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