Most economists who had to explain healthy, stable growth would find yourself describing largely today’s GDP numbers. The economy grew at an annual inflation-adjusted rate of two.8% within the third quarter of 2024, after growing 3.0% within the previous quarter. Outside of the volatile inventory buildup, economic growth actually accelerated. Income growth from sustained job growth and wages above prices drives consumer spending. U.S. firms are proving to be highly competitive in global markets across a wide selection of products and services. Companies proceed to take a position at relatively high levels to reap the benefits of latest opportunities in a highly dynamic economy. And government spending supports longer-term growth through infrastructure investment. The economy is developing at a healthy pace while firms and governments are laying the muse for further growth.
The economy is fundamentally strong. GDP has grown for ten quarters in a row. The economy is now $2.4 trillion larger than it was at the top of 2019, just before the Covid-19 pandemic. This implies that despite a large recession during this era, the economy grew by 11.4% in lower than five years, or an annual rate of two.3%. Over the past 4 years, from the third quarter of 2020 to the third quarter of 2024, the economy grew at an annual inflation-adjusted rate of three.0%. The current growth rate is strictly in step with its longer-term average, suggesting that the economy has found solid footing.
Consumer spending is the important thing to current growth. It rose at an annual rate of three.7% within the third quarter of this 12 months, up from 2.8% within the second quarter. Included in that increase is an 8.1% increase in spending on durable goods – cars, furniture and other longer-lasting goods. Additional spending on longer-lasting items tends to signal consumer confidence within the economy has regularly improved since spring of this 12 months. Similarly, the rise in consumer spending follows a rise in income. The savings rate has been around 5% of disposable income (after taxes) since spring 2023, suggesting that income and consumption followed closely during this era.
This close relationship between spending and income is notable for 2 reasons. First, it means that customers haven’t taken on more debt to spice up spending, as was the case within the years before the financial crisis of 2007 to 2009. Secondly, it also means that individuals aren’t spending the additional wealth they’ve from the rise within the stock market and from higher property values. The wealth effect shouldn’t be apparent in the info, meaning persons are largely keeping their powder dry going forward. Overall, consumer spending is robust and healthy and has the potential to stay at these levels for a while.
Another shiny spot for the US economy is exports. Exports rose at an annual rate of 8.9% within the third quarter, after growing just 1.0% within the second quarter. Rising exports of petroleum and petroleum products (+14.4%) played a job, but additionally a rise in civil aircraft (+38.7%), computers and peripherals (+64.3%), other capital goods apart from cars and trucks – of any form of machinery – (+21.1%), in addition to, amongst other things, education and tourism (+5.6%). That is, many U.S. economic sectors are globally competitive and will subsequently reap the benefits of latest opportunities wherever they arise.
Government spending also rose by a whopping 5.0%. State and native spending, which accounts for a much larger share of GDP than federal spending, rose 2.3% within the third quarter. State and native investment, which accounts for the majority of infrastructure investment, rose 2.2% within the third quarter of this 12 months, marking the ninthTh State and native capital spending increased for the quarter in a row. The amount of recent infrastructure investment — the number of recent roads, bridges and broadband investments alone — made by state and native governments is now the very best on record, even accounting for higher prices. In doing so, governments are laying the muse for faster, longer-term growth.
Business investment continued to rise, but at a slower pace than before. Nonresidential investment rose 3.3% within the third quarter, barely below the three.9% within the second quarter. The decline reflected a shift in investment priorities from structures (-4.0%) to equipment (11.1%). Investments in mines (-8.2%) and industrial real estate (-8.1%) fell, while investments in latest production facilities (+2.2%) continued to extend, although not on the breathtaking double-digit rates seen in essentially the most past years. Instead, firms spent more on information processing equipment (+14.7%) and transportation equipment (+25.9%) within the third quarter. The shift in firms’ investment priorities likely reflects changes within the economy, resembling more computing power to integrate AI and maybe tax incentives to make transportation more efficient and fewer polluting. Overall, from roads and bridges to manufacturing facilities, computers and trucks, firms and governments have built and proceed to construct much latest manufacturing capability across the board, laying the muse for strong and stable longer-term growth.
The economy stays very healthy with all sectors contributing to its growth. In fact, in the event you look closely, the economy strengthened within the third quarter in comparison with the second quarter of this 12 months. The economy received a lift of 1.1 percentage points in GDP growth as firms built up inventories more quickly. In the third quarter, firms slowed the pace of inventory builds, reducing GDP growth by 0.2 percentage points. Apart from the volatile and difficult to interpret inventory build-up, the economy grew faster within the third quarter than within the second quarter. The economy is in healthy and robust shape and there are good reasons to consider that growth will remain stable over the long term.