UPDATE 3 - US economy expands 2.8% in 3rd quarter, lower than estimates of 3%

UPDATES WITH COMMENTS FROM MORTGAGE BANKERS ASSOCIATION'S CHIEF ECONOMIST

By Ovunc Kutlu

ISTANBUL (AA) - The US economy expanded 2.8% in the third quarter of 2024, according to the Commerce Department's first advance reading released Wednesday.

The figure came lower than market estimates of 3%.

The American economy expanded by 3% in the second quarter of 2024.

The current dollar GDP increased 4.7% at an annual rate, or $333.2 billion, in the third quarter to reach $29.35 trillion, a Commerce Department statement said.

"In the second quarter, GDP increased 5.6 percent, or $392.6 billion," it added.

Current-dollar personal income increased $221.3 billion in the third quarter, up from gains of $315.7 billion in April-June, according to the agency.

"The increase primarily reflected an increase in compensation," said the statement.

Disposable personal income, meanwhile, increased $166 billion, or 3.1% in July-September, following an increase of $260.4 billion, or 5%, in the second quarter.

Personal savings, however, were 1.04 trillion in the third quarter, down from $1.13 billion in the second quarter.

"The personal saving rate — personal saving as a percentage of disposable personal income — was 4.8 percent in the third quarter, compared with 5.2 percent in the second quarter," the statement said.

US President Joe Biden said American economy has grown 12.6% since he has taken office in January 2021, and the US had the lowest average unemployment in 50 years, with nearly 16 million jobs created and incomes rising $4,000 more than inflation.

"Today’s GDP report shows how far we’ve come since I took office—from the worst economic crisis since the Great Depression to the strongest economy in the world," he said in a statement released by the White House.

"While critics thought we’d need a recession to lower inflation, instead we’ve grown around 3% a year on average, while inflation has fallen to the level right before the pandemic," he added.

Biden said he and Vice President Kamala Harris are fighting to lower costs on everyday goods, from housing and groceries to health care and child care, and criticized Republicans, claiming they fight for more tax breaks for the wealthy and large corporations.

"We need to keep building on this progress. Instead, Congressional Republicans are proposing across-the-board tariffs that would cost families nearly $4,000 a year, reignite inflation, and kill hundreds of thousands of jobs," he said.

Mike Fratantoni, Mortgage Bankers Association's (MBA) chief economist, said in a statement the third quarter growth was "due primarily to strong consumer spending for both goods and services."

"A half-percentage point of the growth was due to government spending on national defense, much stronger than recent quarters," he added.

The MBA forecasts US economic growth to slow in the fourth quarter and through 2025, and said this slowdown will lead to some softening of the labor market with the unemployment rate rising through next year.

“The inflation measures in this third quarter report show further progress towards the Fed’s inflation target, with the core PCE metric growing at a 2.2% rate," said Fratantoni.

The MBA said it expects the Federal Reserve to cut interest rates by 25 basis points at its two-day meeting next week, which will conclude on Nov. 7.