U.S. economic growth expanded at a solid pace in the third quarter's second preliminary estimate (of three).Real Gross Domestic Product (GDP), a broad measure of all goods and services produced by the U.S. economy (adjusted for seasonality and inflation), grew at an annualized expansion rate of 2.8% in Q3 2024, in line with expectations. Growth in the second quarter grew by 3.0%, and 1.6% in the first quarter. Consumer spending (which comprises nearly 70 percent of GDP) continues to boost the economy higher, as did contributions from exports, federal government spending, and nonresidential fixed investments, offset by an increase in imports, which is a subtraction in the GDP calculation. Both goods and services increased solidly within consumer spending, growing by 5.6% and 2.6%, respectively. Consumer spending overall increased by 3.5% for the quarter, up from the 1.9% gain in Q1 and 2.8% in Q2. Government spending added 0.83% to the headline gain, fueled by a larger contribution from the federal level. Exports also contributed to growth, surging by 6.5% in the quarter, but were more than offset by the rise in imports. Overall, the U.S. economy is proving to be surprisingly durable as growth has topped 2% for eight of the past nine quarters. Furthermore, thepersonal consumption expenditure price index (PCE), a key indicator of the average change in price for all domestic personal consumption and the Federal Reserve’s preferred inflation gauge, was also released in the prior week showing pricing pressures edged higher. The headline gauge increased by 0.2% for the month, raising the annual inflation rate to 2.3%. Both came in line with expectations but rose from September’s annual inflation rate of 2.1%. Core PCE, which excludes volatile categories of food and energy, showed an even stronger reading. The core rate rose by 0.3% for the month and showed an annual rate of 2.8%. Both came in line with expectations, while the annual rate rose 0.1% from the prior month’s reading. The data showed that inflation remains hot, above the Federal Reserve’s long-term target of 2.0%, meaning the Fed is not out of the woods yet. Fed officials continue to weigh in on the economy and assess the appropriate level of policy. TheFed minutesfrom the November monetary policy committee meeting showed policymakers discussing the possibility of a pause in rate cuts if inflation shows a lack of easing (although the path is expected to be bumpy). PCE inflation peaked in June 2022 at around 7.2% and sits at 2.3% today, despite this deceleration in the past two years, the cumulative effects of inflation have affected consumer pockets. Resulting in a change of behavior such as replacing more expensive items for less expensive items. Regardless, the report showed that consumer spending remained solid in October, easing slightly from the prior month. Current-dollar expenditures rose 0.4% for the month, as expected. While personal income jumped 0.6%, well above the 0.3% forecasted. Policymaker testimonies and discussions at the November meeting indicate that Fed officials are confident that inflation is still moving steadily towards the 2% target. Members advocated for a gradual reduction in rates and will remain data-dependent as uncertainty persists. | 
