The US economy expanded at a solid pace in the third quarter, largely powered by a broad-based advance in consumer spending as inflation continued to cool.
Gross domestic product increased at a 2.8% annualized 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%, the most this year.
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 leveled 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%, after a revised 2% annualized 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%.
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% last quarter from 15.5% 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.
The GDP report showed the Fed’s preferred metric — the personal consumption expenditures price index — rose at an unrevised 1.5% annualized rate in the third quarter. Excluding food and energy, the core PCE gauge climbed 2.1%, versus 2.2% 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% in October from a year ago. The monthly report is also expected to show resilient household demand at the start of the fourth quarter.
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