U.S. Economy Grew at 2.8% in Q3 2024, Driven by Consumer Spending and Exports
The U.S. economy grew at a 2.8% rate in the third quarter of 2024, which was slightly below economists' expectations. This growth was driven by several key factors:
Key Drivers of Growth
- Consumer Spending: Consumer spending increased by 3.7%, contributing nearly 2.5 percentage points to the total GDP growth. This was the strongest performance since the first quarter of 2023. The increase in consumer spending was driven by both goods and services, with notable contributions from motor vehicles and parts, prescription drugs, health care, and food services and accommodations.
- Exports: Exports rose by 8.9%, reflecting an increase in goods, particularly capital goods excluding automotive. This growth in exports partially offset the impact of rising imports, which surged by 11.2%.
- Federal Government Spending: Federal government spending increased significantly, by 9.7%, driven primarily by a 14.9% surge in defense outlays. This contributed 0.6 percentage points to the GDP growth rate.
Factors Slowing Growth
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Inventory Investment: There was a downturn in inventory investment, which negatively impacted the GDP growth rate.
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Housing Investment: A larger decrease in housing investment also contributed to the deceleration in GDP growth compared to the previous quarter.
Prices and Income
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Inflation: Gross domestic purchases prices increased by 1.8%, with the personal consumption expenditures (PCE) price index rising by 1.5%. Excluding food and energy, the core PCE index increased by 2.2%.
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Labor Market
The labor market remained resilient, with employers adding 254,000 jobs in September, far exceeding expectations. The unemployment rate ticked down to 4.1%, near a 50-year low.
Economic Outlook
Despite the strong growth in the third quarter, the overall economic outlook for 2024 and 2025 is somewhat subdued. Real GDP growth is expected to average 2.7% in 2024 and ease to 1.9% in 2025. The Federal Reserve is poised to lower interest rates further, with expectations of a quarter percentage point cut in the upcoming meeting.
In summary, the U.S. economy's growth in the third quarter of 2024 was driven by robust consumer spending, strong exports, and significant federal government spending, despite a deceleration in inventory and housing investment. The labor market remains strong, and inflation has slowed, although it remains slightly above the Federal Reserve's target. The future outlook suggests a moderation in growth rates in the coming years. 
