US GDP grew 2.8% in third quarter, slower than expected

Don Luskin, TrendMacro's chief investment officer, offers his analysis after Jamie Dimon's criticism of the economy under Biden-Harris on The Evening Edit.

The U.S. economy grew slightly slower than expected in the third quarter, amid slowing inflation and strong consumer spending.

The Commerce Department's Bureau of Economic Analysis released its preliminary estimate of third-quarter gross domestic product (GDP), which found that the U.S. economy grew 2.8 percent annually in the third quarter, which extends from July to September.

Economists surveyed by LSEG expected economic growth of 3% in the quarter. The report also finalizes growth of 3% in the second quarter.

Consumer spending, which accounts for about two-thirds of GDP, rose 3.7% in the third quarter and accelerated from 2.8% in the second quarter.

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The US economy grew 2.8% annually in the third quarter, according to the Commerce Department's preliminary estimate. (Joe Raedle/Getty Images/Getty Images)

Business investment rose 0.3% in the third quarter, as private investment in inventories slowed and residential fixed investment declined more significantly.

The report shows that personal income in current dollars increased by $221.3 billion in the third quarter, a smaller increase than the $315.7 billion in the second quarter – the increase mainly reflecting an increase in compensation. Personal disposable income increased by $166 billion, or 3.1%, in the third quarter, after increasing by $260.4 billion, or 5%, in the previous quarter.

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Consumer spending was the main driver of growth in the third quarter. (Robert Nickelsberg/Getty Images/Getty Images)

Personal savings totaled $1.04 trillion in the third quarter, down slightly from $1.13 trillion in the second quarter, while the personal savings rate also declined from the previous quarter, standing at 4.8% in the third quarter, compared to 5.2% in the previous quarter.

“The third-quarter GDP increase is even better than it looks, as actual final sales to domestic buyers matched their largest gain since the first three months of 2023,” said Ryan Sweet, an economist in head for the United States at Oxford Economics. “Even though GDP is looking backward, it sends a clear message that the economy is doing well and inflation is moderating, which is good news for the Federal Reserve.”

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Business investment slowed in the third quarter, according to the Commerce Department report. (Emily Elconin/Bloomberg via Getty Images / Getty Images)

The Federal Reserve is scheduled to meet next week and is expected to announce a 25 basis point cut in interest rates after beginning this rate cut cycle with a 50 basis point cut in September.

Stronger-than-expected labor market and inflation data over the past month has caused markets to move away from expectations of another 50 basis point cut to a more modest decline in November.

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“We do not expect third-quarter GDP to change the Fed's calculations for its November meeting and the forecast remains for a 25 basis point cut. If the data continues to be stronger than expected “However, the Fed may start to launch trial balloons on the possibility of skipping a December rate cut. For now, we are sticking to our forecast of a December rate cut,” Sweet said. .

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