The U.S. economy expanded by 2.8% in Q3 of 2024
The United States’ gross domestic product (GDP) witnessed an annual growth of 2.8% in the third quarter, as declared by the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) in its second estimate released on 27 November.
Furthermore, the government informed that the economy underwent a rise of 2.8% annual growth rate from July to September. It strengthened consumer spending by 3.5% and gained in exports. This also confirmed the forecast by an Economist poll by Reuters that the initial Q3 growth will stay the same.
What Does The GDP Data Analysis Of The Third-Quarter Shows?
The data according to the second estimate released by the U.S. Bureau of Economic Analysis suggests that the rise in real GDP mainly resulted in increases in consumer spending, exports, federal government spending, and nonresidential fixed investment. Also, the Imports which are considered as subtraction in the calculation of GDP, rose.
The decline in the real GDP in the third quarter compared to the second one is caused by mishaps in private inventory investment and also a huge drop in residential fixed investment. In the third quarter, the Current‑dollar GDP soared 4.7 % at an annual rate, or $337.6 billion, to a level of $29.35 trillion. In the second quarter, GDP rose 5.6 %, or $392.6 billion.
The price index for gross domestic purchases increased 1.9 % in the third quarter, compared with an increase of 2.4 % in the second quarter. Real gross domestic income (GDI) increased by 2.2 % in the third quarter, compared with an increase of 2.0 % (revised) in the second quarter.
Chairman Arrington’s Statement on GDP Growth
After the release of the Bureau of Economic Analysis on GDP growth for Q3 2024, House Budget Committee Chairman Jodey Arrington expressed his opinion.
He warned that though growth is improving, the focus should be on inflation. He continued by saying that already $2 trillion is in deficit and a record $36 trillion is in debt.
He expects that under President Trump’s leadership, the economic result will be significantly better which includes supply-side relief and spending restraint.
What will be President Trump’s response to the economic report?
The voters in America were not very happy with the steady growth and chose Donald Trump as the next president who will be supported by Republican majorities in the House and Senate.
Moreover, Trump will take over and in general a healthy economy. He has already promised an economic shakeup. He said he would impose new import taxes on goods from China, Mexico and Canada.
David Mericle, chief US economist at Goldman Sachs Research feels that this doesn’t show that the new government will likely make any major changes in the current course of the economy or monetary policy. He also says that the impact might be seen earlier in the inflation numbers.
Trump’s victory has given rise to a flow in stock prices. It is driven by traders’ optimism that the Trump government’s economic policies will improve corporate profits. He plans to reduce corporate taxes and he has appointed Wall Street executives to lead the Treasury and Commerce departments. However, some economists are concerned that his fiscal strategies might lead to inflation.
What will be the Fed’s approach during the Trump administration?
The experts at Goldman Sachs Research foresee the funds rate will continue to cut down to 3.25–3.5% from the current 4.5–4.75% by the Federal Reserve. This would still be 100 basis points higher than the last cycle’s.
According to the Economists, the Federal Open Market Committee will keep modifying its estimate of the neutral rate, which is the interest rate that won’t be able to stimulate or slow the economy. Furthermore, factors which do not come under monetary policy, such as large fiscal deficits and strong risk sentiment, are extenuating the effects of higher interest rates on demand.
Lydia Boussour EY-Parthenon Senior Economist, Strategy and Transactions, Ernst & Young LLP believes the Fed might plan to slow the recalibration process as policymakers can find their way to a more neutral policy viewpoint.
Will U.S. Economy Be Stronger In 2025?
According to Mericle’s team report, “2025 US Economic Outlook: New Policies, Similar Path.”, 2025, GDP is projected to exceed presumption by growing by 2.5% in 2025, also. The fund rate will continue to cut down through Q1 before the Fed reduces the pace toward the end of the cutting cycle. Also, the 12-month recession probability will remain low at 15%.
Wall Street strategists have a positive view of 2025, with Wells Fargo setting the top S&P 500 target of 7,007 by Q3’s end, indicating a possible 26% rise. Deutsche Bank and Yardeni Research also forecasted that the index will hit 7,000.
According to reports by the Organization for Economic Co-operation and Development (OECD), the American economy is estimated to decline in growth over the next two years. It also anticipates that the growth of the U.S. economy will be resilient but drop over the next two years. It is 2.8% in 2024 then will drop to 2.4 percent in 2025 and then 2.1% in 2026.
The OECD has also proposed some solutions such as the high-accomplished labor deficits could be worked out by making changes to the visa system to bring in experts from abroad.
The current view of 2025’s economy seems optimistic, driven by projected Federal Reserve rate reductions, a favorable administrative atmosphere, and expanding corporate frames.
