US Economy Records 2.8% Growth in Q3 Amid Consumer and Export Strength

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The United States economy expanded at an annual rate of 2.8% in the third quarter of 2024, according to data released by the Commerce Department. Strong consumer spending and increased exports were the primary drivers of growth, although the figure represented a slowdown from the 3% growth recorded in the previous quarter. Despite this, the US economy has maintained a steady pace, surpassing the 2% growth benchmark in eight of the last nine quarters.

Consumer spending, which constitutes approximately 70% of US economic activity, surged to a 3.5% annual rate, the fastest increase since late 2023. Exports also played a critical role, rising at a 7.5% annual rate, marking a two-year high. However, both metrics fell short of initial projections, tempering the optimism slightly. A measure of the economy’s core strength—which excludes volatile factors like exports and inventories—rose by 3.2% in the quarter, improving from 2.7% in the second quarter.

Inflation Eases but Long-Term Challenges Persist

Economic indicators revealed a stable environment as the unemployment rate held at 4.1%. Inflation continued its downward trajectory, with the PCE index increasing just 1.5% annually in Q3, a significant drop from 2.5% in Q2. Core inflation also eased to 2.1%. However, prices remain about 20% higher than February 2021 levels, underscoring lingering cost pressures on households.

In response to moderated inflation, the Federal Reserve cut interest rates in September and October, with another reduction expected in December. Despite this, business investment showed signs of weakness, particularly in residential and commercial property sectors, although equipment spending offered a bright spot.

Looking ahead, the incoming President-elect is expected to oversee a generally stable economy but faces challenges, including proposed tariffs on imports and potential labor shortages due to stricter immigration policies. Experts warn that these measures could exacerbate inflationary pressures while complicating labor market dynamics. The Commerce Department is set to release its final GDP report for Q3 on December 19, providing further clarity on the economy’s trajectory.