US Economy Expands 3.1 Percent in 3rd Quarter, Fueled by Consumer Spending, Exports

The U.S. economy was stronger than expected in the third quarter as upward revisions to consumer spending and exports bolstered the July–September GDP growth rate.

This was also slightly up from the second-quarter GDP reading of 3 percent.

Officials say the update reflected upward adjustments to real (inflation-adjusted) consumer spending, surging by 3.7 percent in the three months. Consumer spending on goods and services rose by 5.6 percent and 2.8 percent, respectively.

Changes to exports were also reported as shipments advanced by close to 10 percent.

Government outlays added more than one-quarter to the final GDP estimate, rising by more than 5 percent.

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On the prices front, the Federal Reserve’s preferred inflation measure eased in the third quarter.

Personal consumption expenditure (PCE) inflation slowed to 1.5 percent, down from 2.5 percent in the previous quarter. Core PCE inflation, which strips the volatile energy and food categories, eased to a slightly higher-than-expected 2.2 percent from 2.8 percent.

Following the December policy meeting, Federal Reserve Chair Jerome Powell repeatedly highlighted the economy’s strength.

“The U.S. economy is just performing very, very well, substantially better than our global peer group,” Powell told reporters at the post-meeting press conference. “The outlook is pretty bright for our economy.”

Economic observers say the U.S. economy has been outperforming the rest of the developed world. Based on the International Monetary Fund’s (IMF) latest projections, the United States will continue to surpass many other advanced economies.

By comparison, the Euro Area is seen growing at a subdued pace of 0.8 percent this year and 1.2 percent next year. The Japanese economy is forecast to expand by 0.3 percent in 2024 and 1.1 percent next year. The UK’s growth rate is projected to be 1.1 percent this year and 1.5 percent in 2025.

A key reason for this is the United States’ spending on research and development (R&D), says Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments.

“R&D spending drives productivity; the result is GDP growth in the U.S., which dwarfs other developed nations,” Tengler said in a note emailed to The Epoch Times. “We expect the U.S. to continue to be the best house on the block.”

With the incoming administration potentially lowering corporate tax rates and slashing regulations, growth could be better than many estimates.

National Center for Science and Engineering Statistics data show the United States spent nearly $886 billion on R&D in 2022. By comparison, Japan and the UK spent $136 billion and $89 billion on R&D in 2022, respectively.

Other Economic Data

Financial markets digested other economic data on Dec. 19.

Continuing jobless claims—a measure of the number of out-of-work individuals who qualify for unemployment insurance—were little changed at 1.87 million. The four-week jobless claims average, which removes the week-to-week volatility, edged up to 225,500.

Manufacturing continued to weaken this month.

U.S. stocks looked to rebound after the Dec. 18 selloff, resulting in the blue-chip Dow Jones Industrial Average posting its first 10-day losing streak in 50 years.

The leading benchmark indexes were up by about 0.8 percent before the opening bell.

Treasury yields maintained their climb, with the 10-year yield reaching 4.55 percent.

The U.S. dollar index, a metric of the greenback against a weighted basket of currencies, slipped below 108.00. Still, year-to-date, the index is up by more than 6 percent.