US Economy Expected to Have Grown 3.2% in Third Quarter as AI Spending Offset Higher Oil Prices
The Commerce Department publishes its first estimate of third-quarter growth on Thursday morning, with economists surveyed by Reuters penciling in a 3.2% annualized gain, up from 2.2% in the second quarter.
The United States economy likely grew faster in the third quarter, as consumer spending and AI-linked business investment outweighed the drag from higher oil prices, according to a Reuters survey of economists.
The Commerce Department’s Bureau of Economic Analysis will publish its estimate of third-quarter gross domestic product at 8:30 a.m. ET on Thursday, less than a week before Tuesday’s midterm elections. Economists surveyed by Reuters put growth at a 3.2% annualized rate, up from 2.2% in the April-June quarter.
FactSet expects 3%, the Federal Reserve Bank of Atlanta’s GDPNow model puts growth at 3.4%, and the New York Fed’s staff model predicts 2.7%.
Consumers and AI spending led growth
Consumer spending, which accounts for more than two-thirds of the economy, is projected to have risen above a 3.0% pace after growing 3.8% in the second quarter. Business spending on equipment is expected to have grown at a double-digit pace for a third straight quarter, and spending on intellectual property products also likely rose.
Trade worked the other way. September trade data showed the goods deficit widening as demand for capital goods pushed imports to a record high, and economists estimated the shortfall subtracted at least 4 percentage points from growth last quarter.
Higher prices still weigh on households
Households face a weaker picture. Average gasoline prices remain above $4 a gallon, households have been saving less, and higher mortgage rates are expected to have pushed residential investment back into contraction. “People are very upset about high energy and food prices, and yet the fundamentals for consumers are still decent,” Gus Faucher, chief economist at PNC Financial, told Reuters.
The Federal Reserve left its benchmark rate in the 3.75% to 4.00% range on Wednesday, noting inflation remains elevated. Economists expected the Fed to raise rates in December, Reuters reported.
Reporting based on coverage by Reuters and Barron’s.
