Research
December 19, 2024

GDP

Consumer Spending Powers 3.1% Q3 U.S. Economic Growth

The U.S. economy expanded at an annualized rate of 3.1% in the third quarter of 2024 in newly revised data. Over the past six months, real GDP has grown by 3.0% at the annual rate, highlighting the economy's continued resilience, particularly in consumer spending. For the full year, projections suggest real GDP growth will average 2.8%, closely aligning with the 2.9% rate achieved in 2023. While a number of uncertainties exist in the economic outlook for next year, the current forecast is the U.S. economy to grow by 2.5% in 2025.


The underlying data for Q3 2024 presented a mixed picture. On the positive side, consumer spending remained a key driver, climbing 3.7% at an annualized rate, boosted by a rebound in goods purchases. Services spending increased 2.8% for the quarter. Personal consumption expenditures, encompassing both goods and services, contributed 2.48 percentage points to overall growth. Notably, foodservices and accommodations, which had previously weighed on growth in the first two quarters of this year, added 0.07 percentage points to Q3 GDP—a welcome turnaround.

Nonresidential fixed investment expanded by 4.0%, supported by gains in equipment spending and intellectual property products. However, investment in new nonresidential structures declined for the first time since Q4 2021, and residential spending remained weak for the second consecutive quarter, reflecting challenges in the housing market. Business inventory investment, which had surged in Q2, fell somewhat in Q3, resulting in a relatively small 0.16 percentage point contribution from overall business investment, including both fixed investments and inventories.

Government spending remained a bright spot, increasing 5.1% at an annual rate and adding 0.86 percentage points to GDP growth. However, trade dynamics weighed on growth, as imports outpaced exports, particularly in services, with net exports subtracting 0.43 percentage points from headline growth. Net exports have now acted as a drag on U.S. economic performance in five of the last six quarters.