US GDP confirms another strong quarter for US economy-111204806

North America Economic Research30 October 2024J P M O R G A Nwww.jpmorganmarkets.comEconomic and Policy ResearchAbiel Reinhart(1-212) 270 4058abiel.reinhart@jpmchase.comJPMorgan Chase Bank NA•Real GDP grew 2.8%q/q saar (2.7%oya), delivering another solid quarter of growth similar to 2Q’s 3.0% gain, while the pace of real final sales improved compared to 1H24 •Gains were led by consumer spending, equipment investment, exports, and government spending, especially defense, whereas structures declined and IPP hardly grew again•The overall takeaway is that the US economy continued to chug along going into the second half of the year. We expect growth to moderate to a slightly less than 2% pace in 4Q, reflecting in part moderation in the growth of consumer spending, equipment investment, and government spending US real GDP turned in another strong performance in 3Q, rising 2.8%q/q saar (2.7%oya) in the advance report. The details were broadly in line with our forecast, though with lower changes in nonresidential structures and IPP than we expected and larger gains in consumption and government spending. Moreover, although headline GDP slowed slightly relative to 2Q’s 3.0% pace, growth in final sales (which excludes inventory building) was stronger this quarter, rising 3.0% compared to a roughly 2.0% rate in each of the prior two quarters. There are a number of areas where we could see growth slowing in future quarters (consumption, equipment investment, goods exports, defense spending), but this should not distract from what is on balance a report showing an economy continuing to grow at a brisk pace through last quarter. Gains in 3Q were led by the consumer, whose spending rose 3.7%, the largest increase since the start of 2023, with strong spending on goods (6.0%) while services were more subdued (2.6%). Increases in spending were supported by a 3.5% rise in real employee compensation, which was similar to the prior quarter, and the saving rate only fell a bit, to 4.8% from 5.2% in 2Q.Private fixed investment was more mixed, rising 1.3%, which is the smallest gain since the end of 2022. Equipment investment was strong, rising 11%, the most in over a year, but nonresidential structures fell 4.0%, residential structures fell 5.1%, and IPP turned in another small gain, rising just 0.6%, which was almost the same as the prior quarter (0.7%). As with the prior quarter there was a big rise (414%) in aircraft, and excluding this equipment spending rose a more modest 2.9%, driven by robust growth in information processing equipment (15%) and industrial equipment (7%), offset by declines in vehicles and other equipment. Monthly aircraft shipments are already turning over after huge gains in 2Q and early 3Q, so headline equipment investment will likely slow in 4Q, though the AI boom is likely to continue to power tech-related investment. Speaking of AI, while news reports imply significant R&D in that area, this isn’t turning into big gains in aggregate IPP i