The American economy experienced a healthy 3.1% annual growth rate in the third quarter of the year, driven by strong consumer spending and an increase in exports, according to the Commerce Department. This growth exceeded the previous estimate and continued a trend of robust growth in GDP, with eight of the last nine quarters seeing growth rates above 2%. Consumer spending, which makes up a significant portion of the U.S. economy, grew at a 3.7% pace, the fastest since the first quarter of 2023, while exports climbed by 9.6%. Business investment was lackluster at 0.8%, but equipment investment saw a substantial increase of 10.8%. Federal government spending also saw a significant increase of 8.9%, with defense spending surging by 13.9%.
Despite the positive economic growth, American voters were largely unimpressed with the performance under Democratic President Joe Biden. Frustrated by high prices that were 20% higher than when inflation began to surge in early 2021, voters chose to bring former President Donald Trump back to the White House with Republican majorities in both the House and Senate. Trump will inherit an economy that appears to be overall healthy, with a low unemployment rate of 4.2%, although it is slightly up from the 53-year low of 3.4% reached earlier in 2023. Inflation hit a four-decade high of 9.1% in mid-2022, but has since been brought down to 2.7% last month due to eleven interest rate hikes by the Federal Reserve in 2022 and 2023.
The new president-elect has promised significant changes in economic policy, including tax cuts, imposing tariffs on foreign goods, and deporting millions of undocumented immigrants working in the U.S. Economists are concerned that these policies could lead to higher inflation. Despite these potential challenges, the economy is expected to end 2024 on a solid note. A category within the GDP data that measures the underlying strength of the economy rose at a 3.4% annual rate in the third quarter, an improvement from previous estimates. Inflation also showed positive signs, with the Federal Reserve’s preferred inflation gauge, the PCE index, rising at just a 1.5% annual pace in the third quarter.
The Commerce Department’s report on third-quarter GDP was its final assessment, with the next estimate of growth for the October-December period set to be released on January 30. The data suggests that the economy is in a relatively stable position, despite policy uncertainties and potential challenges in the coming year. The Federal Reserve has shown confidence in the progress against inflation by cutting its benchmark rate for the third time this year, indicating a willingness to address economic concerns as they arise. Overall, the U.S. economy continues to show signs of strength and resilience, with solid consumer spending, strong export growth, and a relatively low unemployment rate contributing to the positive outlook for the future.
