US GDP grows at solid 2.8% pace, helped by consumer spending
Add BT as a preferred source
THE US economy expanded at a solid pace in the third quarter, largely powered by a broad-based advance in consumer spending and steady business investment.
Gross domestic product increased at a 2.8 per cent annualised pace in the third quarter, the second estimate of the figures from the Bureau of Economic Analysis showed Wednesday. The economy’s primary growth engine – consumer spending – advanced 3.5 per cent, the most this year.
While still strong, household spending was revised modestly lower from the initial reading, reflecting slightly less robust outlays for merchandise. At the same time, business investment in research and development was revised higher.
The GDP report showcases the durability of an economic expansion that’s been tested by lingering price pressures, high borrowing costs and political uncertainty. While progress on inflation has levelled out more recently, the Federal Reserve has started reducing interest rates.
With Donald Trump sealing his return to the White House, American businesses and consumers now await the roll-out next year of his economic agenda.
The government’s other main gauge of economic activity – gross domestic income – rose 2.2 per cent, after a revised 2 per cent annualised pace in the second quarter. Whereas GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing those same goods and services. The average of the two growth measures in the third quarter was 2.5 per cent.
Navigate Asia in
a new global order
Get the insights delivered to your inbox.
The GDI data include figures on corporate profits. After-tax profits were little changed. Profits as a share of gross value added for non-financial corporations, a measure of aggregate profit margins, edged up to 15.6 per cent last quarter from 15.5 per cent in the prior three-month period.
Trump’s win has added fuel to a recent rally in stock prices, in part because many traders believe his economic agenda will keep boosting corporate profits. The president-elect has vowed to slash corporate taxes as well as hit Chinese shipments with punitive tariffs, on top of tasking Wall Street executives with leading the departments of Treasury and Commerce.
On the flip side, some economists are concerned that Trump’s fiscal plans will put upward pressure on inflation.
Tamer inflation
The GDP report showed the Fed’s preferred metric – the personal consumption expenditures price index – rose at an unrevised 1.5 per cent annualised rate in the third quarter. Excluding food and energy, the core PCE gauge climbed 2.1 per cent, versus 2.2 per cent in the previous estimate.
Economists are looking ahead to the release of monthly PCE data, due later this morning. It’s currently projected to show the metric, excluding food and energy, rose 2.8 per cent in October from a year ago. The monthly report is also expected to show resilient household demand at the start of the fourth quarter.
Some Fed officials have indicated they’re in no rush to cut interest rates so long the labour market remains resilient and the economy continues to power ahead. While job growth has been softening somewhat, other indicators point to a resilient economy and declining odds of a recession.
Jobless claims
Separate figures from the Labor Department on Wednesday showed initial jobless claims were little changed at a historically low level. However, continuing applications, a proxy for the number of people receiving benefits, rose to the highest since 2021. That suggests those who are unemployed are having trouble finding another job.
Stock-index futures were little changed and Treasury yields remained lower after the data, with investors awaiting October inflation figures later this morning.
The revised GDP data show third-quarter growth was restrained by volatile trade figures, which showed net exports subtracted 0.57 percentage point. Inventories also subtracted 0.11 percentage point.
Other government data out Wednesday showed the merchandise trade deficit narrowed in October to US$99.1 billion from a more than two-year high. Economists see businesses stocking up on imports in anticipation of new tariffs next year.
According to the GDP report, a measure of underlying growth trends favoured by economists that combines consumer spending and business investment, known as final sales to private domestic purchasers, advanced 3.2 per cent, the most this year.
Government spending rose an annualised 5 per cent, helped by a nearly 14 per cent annualised advance in national defence outlays.
Nonresidential fixed investment rose an annualised 3.8 per cent, the slowest this year and dragged down by spending on structures. However, business spending on equipment climbed at a solid 10.6 per cent rate – the most in over a year. That included an 39 per cent annualised increase in outlays on computers and peripheral equipment, the largest advance since 2020.
October shipments of non-defence core capital goods, which exclude aircraft and are a proxy for business investment in equipment, increased 0.2 per cent, separate data out Wednesday showed. That was the first gain since April. Orders for all durable goods rose at a similar pace. BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
TRENDING NOW
Haidilao co-founder’s family buys second bungalow in Cluny Hill for S$85 million
Yeo’s, Tiger Beer and now Gardenia – flight of food manufacturing from Singapore might be just as planned
Prabowo’s biggest crackdown on tycoons shocked his own officials
Apex court rejects resulting trust claim in 99-1 condo dispute
