U.S. economy grew at a 2.8% pace (second estimate)

The U.S. economy posted a solid though slightly disappointing (?) period of growth in the third quarter, propelled higher by strong consumer spending that has defied expectations for a slowdown. With the expectation of attempting to slow inflation, I would think a 2.8% rate of growth would be welcome in light of the Fed waiting on a slower economy before it lowers the Fed Rate. Others may have a different opinion.

Gross domestic product, a measure of all the goods and services produced during the three-month period from July through September, increased at a 2.8% annualized rate, according to a Commerce Department report Wednesday that is adjusted for inflation and seasonality.

CNBS Reporting on the third quarter economy growth. Economists surveyed by Dow Jones had been looking for an increase of 3.1%. The economy accelerated at a 3% pace in the second quarter. Wednesday’s reading is the first of three the department will issue.

The report confirms that the U.S. expansion has continued despite elevated interest rates and long-standing worries that the burst of fiscal and monetary stimulus that carried the economy through the Covid crisis wouldn’t be enough to sustain growth.

However, resilient consumer spending, which accounts for about two-thirds of all activity, has helped keep the economy moving, as has a relentless wave of government spending that pushed the budget deficit to more than $1.8 trillion in fiscal 2024.

Gross Domestic Product, Third Quarter 2024 (Second Estimate) and Corporate Profits (Preliminary) | U.S. Bureau of Economic Analysis (BEA)

Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the third quarter of 2024 (table 1), according to the “second” estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.0 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was also 2.8 percent. The update primarily reflected upward revisions to private inventory investment and non-residential fixed investment as well as downward revisions to exports and consumer spending. Imports, which are a subtraction in the calculation of GDP, were revised down (refer to “Updates to GDP”).

The increase in real GDP primarily reflected increases in consumer spending, exports, federal government spending, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

Compared to the second quarter, the deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and a larger decrease in residential fixed investment. These movements were partly offset by accelerations in exports, consumer spending, and federal government spending. Imports accelerated.

Current‑dollar GDP increased 4.7 percent at an annual rate, or $337.6 billion, in the third quarter to a level of $29.35 trillion, an upward revision of $4.4 billion from the previous estimate (tables 1 and 3). More information on the source data that underlie the estimates is available in the “Key Source Data and Assumptions” file on BEA’s website (available at 10:00 a.m.).

The price index for gross domestic purchases increased 1.9 percent in the third quarter, an upward revision of 0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 1.5 percent, the same as previously estimated. Excluding food and energy prices, the PCE price index increased 2.1 percent, a downward revision of 0.1 percentage point.

Personal Income

Current-dollar personal income increased $175.9 billion in the third quarter, a downward revision of $45.3 billion from the previous estimate. The increase primarily reflected an increase in compensation (table 8).

Disposable personal income increased $122.9 billion, or 2.3 percent, in the third quarter, a downward revision of $43.1 billion from the previous estimate. Real disposable personal income increased 0.8 percent, a downward revision of 0.8 percentage point.

Personal saving was $934.4 billion in the third quarter, a downward revision in change of $34.0 billion from the previous estimate. The personal saving rate—personal saving as a percentage of disposable personal income—was 4.3 percent in the third quarter, a downward revision of 0.5 percentage point.

Gross Domestic Income and Corporate Profits

Real gross domestic income (GDI) increased 2.2 percent in the third quarter, compared with an increase of 2.0 percent (revised) in the second quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.5 percent in the third quarter, the same as in the second quarter (table 1).

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $10.2 billion in the third quarter, in contrast to an increase of $132.5 billion in the second quarter (table 10).

Profits of domestic financial corporations decreased $2.6 billion in the third quarter, in contrast to an increase of $42.5 billion in the second quarter. Profits of domestic nonfinancial corporations increased $30.8 billion, compared with an increase of $108.8 billion. Rest-of-the-world profits decreased $38.3 billion, compared with a decrease of $18.8 billion. In the third quarter, receipts decreased $52.5 billion, and payments decreased $14.2 billion.

Updates to GDP

The second estimate reflects upward revisions to private inventory investment, nonresidential fixed investment, state and local government spending, and residential fixed investment as well as downward revisions to exports, consumer spending, and federal government spending. Imports were revised down.

For more information, refer to the Technical Note. For information on updates to GDP, refer to the “Additional Information” section that follows.

Updates to Second-Quarter Wages and Salaries

In addition to presenting updated estimates for the third quarter, today’s release presents revised estimates of second-quarter wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program. Private wages and salaries are now estimated to have increased $65.0 billion in the second quarter, a downward revision of $91.8 billion. Personal current taxes are now estimated to have increased $39.8 billion, a downward revision of $15.5 billion. Contributions for government social insurance are now estimated to have increased $7.0 billion, a downward revision of $12.4 billion. With the incorporation of these new data, real gross domestic income is now estimated to have increased 2.0 percent in the second quarter, a downward revision of 1.4 percentage points from the previously published estimate.