Economists forecast a slowdown in the U.S.'s economic momentum in the fourth quarter. Still, robust consumer spending is anticipated to maintain the growth till the end of this year. Influential factors such as heightened interest rates, a slower job market, and persistent price pressures have impacted the economy throughout this year, but haven't caused a long-anticipated recession. The Federal Reserve has pivoted focus from combating inflation to preserving a historically low joblessness rate. The trajectory of the American economy in the upcoming fourth quarter is therefore crucial, seen in light of the forthcoming presidential elections and the direction the fiscal policy might take. Analysts are predicting a GDP growth between 1% and 1.5% for the last quarter, making it potentially the weakest quarter of this year, yet eliminating the chances of an economic downturn. For the first and second quarters, the growth in U.S. GDP was registered at 1.6% and 3% respectively, higher than anticipated in Q2. The third quarter report is not out yet but the Atlanta Federal Reserve expects 3.2%. Some economists believe the labor market might be the main source of economic drag, hinted at by signs of deterioration, unusually high layoffs and slower hiring rates. However, positive surprises are not ruled out, as can be seen in the Bureau of Labor Statistics jobs report earlier this month, where the unemployment rate dropped to 4.1% in September with the creation of over 250,000 jobs. Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, dispelled imminent fears, stating, "This should put to rest-at least for the next month-the idea that the economy is about to fall off a cliff or that imminent doom is on the horizon." Resilient consumer spending, thanks to a slowing inflation rate that is easing price pressures, is expected to counteract potential drawbacks from the job market, Gregory Daco, Chief Economist at EY-Parthenon said "The latest economic data continues to point to a gradual economic downshift, with consumers and businesses still spending but doing so with more prudence." Economists also posit that the Federal Reserve’s recent switch to cutting interest rates could further enhance GDP growth. Affected sectors such as housing, construction, and manufacturing, which have suffered from high borrowing costs, may now see a revival. Diane Swonk, Chief Economist at KPMG commented, “Some of the sectors that have been battered the most by high-interest rates are finally able to gain traction again as we move into 2025.”
U.S. Economy Predicted to Keep Expanding Through Q4 Despite Challenges
Despite a slow job market and high interest rates, economists project steady growth of the U.S. economy through year's end, driven by robust consumer spending.
