The latest update from the Commerce Department’s Bureau of Economic Analysis reveals that the U.S. economy experienced a stronger expansion than previously estimated in the third quarter. This growth was primarily fueled by robust consumer spending, with gross domestic product (GDP) increasing at an upwardly revised annualized rate of 3.1%. The initial estimate had put the growth rate at 2.8%. This revision comes as a surprise to economists who had anticipated that the GDP figures would remain unchanged.
The revision in the GDP numbers was driven by positive adjustments in consumer spending and export growth, which managed to offset a downward revision in private inventory investment and an upward revision in imports. These changes reflect a more dynamic and resilient economic landscape than previously assumed. The U.S. economy had already exhibited growth at a 3.0% rate in the preceding quarter from April to June, showcasing a consistent upward trajectory.
Federal Reserve officials have been closely monitoring these economic developments, particularly in relation to inflationary pressures. Despite the recent decision by the central bank to implement a third consecutive rate cut, the Fed’s projections for next year indicate a more conservative approach with only two anticipated reductions in borrowing costs compared to the four previously forecasted. This shift in strategy is attributed to the ongoing economic strength and the persistent threat of elevated inflation.
There are lingering concerns regarding the potential inflationary impact of certain policies proposed by the incoming Trump administration. Measures such as tax cuts, mass deportations of undocumented immigrants, and tariffs on imported goods have raised apprehensions about their overall effect on inflation levels. These policy decisions could potentially influence the overall economic landscape in the coming months.
Chair of the Federal Reserve, Jerome Powell, expressed satisfaction with the current state of the economy, emphasizing that a recession has been successfully averted. He commended the remarkable performance of the U.S. economy and underscored the importance of sustaining this positive momentum. Consumer spending, a significant driver of economic activity, expanded at a 3.7% pace, surpassing the previous estimate of 3.5%.
In analyzing domestic demand, excluding government spending, trade, and inventories, there was a notable increase at a 3.4% pace. This figure indicates a healthy level of economic activity driven by strong consumer demand. When considering final sales to private domestic purchasers, a growth rate of 3.2% was reported, showcasing a positive trend in private sector spending. In comparison, the second quarter saw domestic demand increasing at a 2.7% pace.
National after-tax profits witnessed a decline of $15.0 billion, representing a 0.4% decrease without accounting for inventory valuation and capital consumption adjustments. This figure contrasts with the previous estimate of a $0.2 billion rise, highlighting the volatility in business profitability. When assessed from the income side, the economy recorded a growth rate of 2.1% last quarter, slightly lower than the initial estimate of 2.2%.
