Article Summary –
The U.S. economy grew by 3.1% annually from July to September, driven by strong consumer spending, increased exports, and federal government spending, despite high interest rates. Consumer spending rose at a 3.7% pace, with notable growth in equipment investment and defense spending, while inflation moderated to 2.7% following several interest rate hikes by the Federal Reserve. Despite the healthy economic indicators, American voters expressed dissatisfaction with high prices and elected Donald Trump, who proposes economic policies that could potentially increase inflation.
WASHINGTON (AP) — The U.S. economy expanded by a robust 3.1% annually from July to September, driven by strong consumer spending and rising exports, according to a revised government report.
U.S. GDP growth accelerated from 3% in the previous quarter, persisting despite high interest rates, as reported by the Commerce Department on Dec. 19. GDP growth has exceeded 2% in eight of the last nine quarters.
Consumer spending, which makes up about two-thirds of U.S. economic activity, grew at a 3.7% rate, marking the fastest pace since early 2023, up from the previous estimate of 3.5% for the third quarter.
Exports surged 9.6%. Business investment increased slightly at 0.8%, but equipment investment soared 10.8%. Federal government spending rose 8.9%, including a 13.9% spike in defense expenditures.
Despite economic growth, American voters were dissatisfied with price increases, nearly 20% higher since the inflation surge began in 2021, and elected Donald Trump back to the White House with Republican control of Congress.
Trump enters office with a generally strong economy. The unemployment rate is low at 4.2%, although up from a 53-year low of 3.4% in April 2023. Inflation reached a peak of 9.1% in mid-2002 but fell to 2.7% last month following 11 Federal Reserve rate hikes. Despite remaining above the Fed’s 2% target, the central bank cut its benchmark rate for the third time this year.
The president-elect has vowed significant economic reforms, including tax cuts, high tariffs on foreign goods, and deporting illegal immigrants working in the U.S. Economists fear these policies could spur higher inflation.
Oren Klachkin, economist at Nationwide, remarked, “This week’s data indicate the economy is on track to end 2024 strongly, which is vital as we face potential policy uncertainty and greater challenges in 2025.”
Within the GDP, a measure of underlying economic strength rose at a 3.4% annual rate from July to September, an upgrade from the earlier estimate and a rise from 2.7% in the previous quarter. This measure includes consumer spending and private investment but excludes volatile items like exports, inventories, and government spending.
The report also brought positive inflation news. The Federal Reserve’s preferred inflation metric, the personal consumption expenditures index (PCE), increased at a 1.5% annual rate last quarter, down from 2.5% in the second quarter. Core PCE inflation, excluding food and energy, was 2.2%, slightly up from prior estimates but down from 2.8% in the previous quarter.
The Dec. 19 report was the Commerce Department’s final review of third-quarter GDP. Initial estimates for October-December growth will be released on Jan. 30.
—
Read More Wisconsin News
