U.S. Economy Growth in Q3

WASHINGTON (Reuters) – The U.S. economy grew faster than previously estimated in the third quarter, driven by robust consumer spending.

Gross domestic product increased at an upwardly revised 3.1% annualized rate, the Commerce Department’s Bureau of Economic Analysis reported in its third estimate of the third-quarter GDP on Thursday. The economy was previously reported to have expanded at a 2.8% pace last quarter.

Economists polled by Reuters had forecast GDP would be unchanged. The revision reflected upgrades to consumer spending and export growth, which offset a downward revision to private inventory investment and an upward revision to imports.

The economy grew at a 3.0% pace in the April-June quarter, which is above the Federal Reserve’s non-inflationary growth rate of approximately 1.8%.

The U.S. central bank cut rates for the third consecutive time but projected only two cuts for next year instead of four, citing continued economic resilience and elevated inflation.

Concerns remain regarding policies from the incoming Trump administration, including tax cuts and tariffs, which might be inflationary.

The Fed’s policy rate was reduced by 25 basis points to the 4.25%-4.50% range, following a 5.25 percentage points hike between March 2022 and July 2023 to manage inflation.

Fed Chair Jerome Powell stated, “it’s pretty clear we’ve avoided a recession,” adding that the economy is in a robust state.

Consumer spending, which accounts for more than two-thirds of economic activity, grew at a 3.7% pace, revised from a previously estimated 3.5%. A measure of domestic demand increased at a 3.4% pace.

National after-tax profits, without inventory valuation and capital consumption adjustments, decreased by $15.0 billion (0.4%), revised from an increase of $0.2 billion.

From the income side, the economy grew at a 2.1% rate last quarter, down from an initially estimated 2.2%. Gross domestic income (GDI) rose at a 2.0% rate in the second quarter.

GDP and GDI typically should align, but they differ due to different estimation methodologies. The average of GDP and GDI grew at a 2.6% rate, up from the previously reported 2.5%.

Summary

The U.S. economy grew at a 3.1% annualized rate in Q3, driven by strong consumer spending and exports, despite concerns about inflationary policies and lowered GDI estimates.