The US economy grew at a faster pace in the third quarter than previously estimated amid stronger-than-projected consumer spending, as noted in the final estimate released Thursday by the Bureau of Economic Analysis. Real gross domestic product increased at a 3.1% annual rate in the September quarter, up from the BEA's prior estimate indicating 2.8% growth that was the consensus in a Bloomberg-compiled poll.
In the second quarter, real GDP grew by 3%, according to government data. "A stronger-than-expected showing in third-quarter GDP reinforces the Federal Reserve's characterization of a 'solid' economy and the need for a reduced pace and number of further interest rate cuts," said Stifel Chief Economist Lindsey Piegza and Economist Lauren Henderson in a note to clients. Third-quarter consumer spending — as measured by personal consumption expenditures — was upwardly revised to 3.7% growth from a previous projection of 3.5%, exceeding Wall Street's expectations of a 3.6% increase. On Wednesday, the Fed cut interest rates by 25 basis points and flagged fewer cuts ahead than had been projected in September. "With a strong consumer and positive business investment, there is ample justification for a policy pause sooner than later as we turn the calendar page into 2025," Piegza and Henderson commented on Thursday. The most recent GDP data also reflected an upward revision to exports and a downward revision to private inventory investment, according to the BEA. Headline PCE inflation rose 1.5% in the third quarter, steady with the prior estimate.
Core PCE inflation — which excludes the volatile food and energy components — accelerated to 2.2% from 2.1%, according to government data. The FOMC’s Summary of Economic Projections on Wednesday showed upward revisions to the 2024 and 2025 real GDP growth estimates. Policymakers raised their outlooks for headline and core PCE inflation through 2026..