Gross Domestic Product (GDP) growth missed expectations in the third quarter. The concerning economic data comes just a week before the 2024 U.S. presidential election—though it is unclear how much of an impact the news could have on voters.
The consensus expectations for GDP growth in the third quarter were 3.1 percent. However, the final growth number came in just shy of 2.8 percent. In the second quarter, the economy grew at a rate of three percent.
Additionally, there are some concerns that inflation could be accelerating again. The Core Personal Consumption Expenditures (Core PCE) came in at 2.2 percent, above the 2.1 percent expectation. Core PCE is one of several inflation measures used by the Federal Reserve to monitor and determine price conditions in the United States.
THE FED.
In September, the Federal Reserve announced a relatively unprecedented 50 basis point (bps) rate cut after the Biden-Harris government was forced to admit its job growth numbers had significantly overestimated the strength of the American labor market. This marked the first time the central bank has reduced rates since 2020.
It should be noted that past 50 bps cuts by the central bank have often signaled a looming recession. Concerningly, an anonymous vote of the Federal Reserve’s Federal Open Market Committee (FOMC) suggests the central bank will cut rates by an additional 50 bps before the end of the year. Combined, this would be the largest rate cut over such a short period in 16 years.
The new inflation data, however, may force the Federal Reserve to back down from a second rate cut—as several members of its FOMC remain skittish about resurgent inflation. The third quarter economic data also suggests personal consumption is increasing—though that is to be expected heading into the U.S. holiday season.
