U.S. economy grows at robust rate before Election Day
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Illustration: Annelise Capossela/Axios
There are plenty of imperfect things about the U.S economy. But they should not obscure a central fact about 2024: The economy has barreled forward with robust expansion, despite it all.
Why it matters: The latest GDP report shows the economy kept expanding at an above-trend pace in late summer, with ongoing strength that keeps defying naysayers.
- "Simply put, where is the slowing?" economists at Brean Capital wrote in a note following Wednesday's report.
- That's despite some warning signs that have percolated for months, including a choppy job market, high interest rates weighing on homebuilding, higher debt delinquencies and more.
By the numbers: GDP rose at a 2.8% annualized rate in the July-September period, following the 3% growth in the second quarter.
- An underlying measure of demand that excludes volatile categories like trade and inventories — which don't signal much about the economy's health — also came in strong.
- Final sales to domestic purchasers, adjusted for inflation, rose to 3.5% from 2.8% in the second quarter.
Follow the money: Consumer spending explains much of the most recent quarter's robust activity. Personal consumption expenditures increased at a 3.7% annualized rate, up from 2.8% in the second quarter.
- That category is responsible for almost 2.5 percentage points of overall growth.
The big picture: In other words, consumers who might feel negatively about the economy are not acting like it. Solid hiring and wage growth have helped support activity.
- Anecdotes from some of the nation's large corporations that lower-income consumers are pulling back are not evident — at least not yet — in the aggregate data.
Zoom in: GDP also got a boost from exports and federal defense spending. Meanwhile, business spending on equipment rose a robust 11%.
- On the flip side, further deterioration in the housing sector led by slowing construction activity was a drag on the economy. So were imports: In theory, more imports signal consumer demand, but they are a negative in GDP calculations.
What they're saying: The Biden White House noted that this is the last quarter of GDP data that will be released before the next administration takes over; Q4 data isn't due out until post-inauguration in late January. And they took a moment to boast in a briefing Wednesday morning.
- "Consumer spending is up, and so are savings, on the back of good job opportunities, rising real wages and renewed optimism," top economic adviser Lael Brainard told reporters.
The bottom line: New GDP numbers may not change the election year discourse, but they affirm that the U.S. economy's bull run remains intact, with room yet to go.
