Economic growth in the United States remained strong in Q3, with GDP growth of +0.7% q/q (stable compared to Q2). The acceleration in household consumption (+0.9% q/q, +0.2 pp) confirmed its role as a growth driver, while non-residential investment (+0.8% q/q) and government spending (+1.2% q/q) also made a positive contribution. Conversely, residential investment and net exports were a drag. In Q4, we expect growth to decline slightly to +0.5% q/q, which would bring the average annual growth rate to +2.7% (-0.2 pp) for 2024 as a whole.
According to the early activity surveys for Q4, sectoral divergence is continuing. The decline in the “output” component (46.2, -3.6 pp) caused the ISM Manufacturing index to fall to 46.5 (-0.7 pp) in October, while the ISM Non-Manufacturing index rose for the fourth consecutive month and hit a two-year high of 56.0 (+1.1 pp). In this sector, business and new orders are nonetheless slowing. However, hiring returned to positive territory (53.0, +4.9 pp) and deliveries were slower, indicating more dynamic activity.
Job gains collapsed in October from +223k to +12k, the lowest level seen since February 2019 (excluding the pandemic). However, monthly data were severely affected by Boeing’s workers' strike (employment in the “goods production” sector fell by -37k), with adverse weather conditions also hampering data collection. The unemployment rate remained stable at 4.1%, while wages accelerated marginally (+4.0% y/y, +0.1 pp).
On the inflation side, base effects explain the first annual CPI increase in 7 months, to +2.6% (seasonally adjusted data, +0.2 pp), and the annualised 3m/3m to +1.9% (+0.7 pp). At the same time, core disinflation did not make further progress: it remained stable in year-on-year terms (+3.3%) and also on a monthly basis (+0.3%).
The FOMC meeting on 6-7 November resulted in an expected cut of 25 bps in the Fed funds target to 4.50%-4.75%. This move is justified by the risks, which were "roughly in balance", around the dual mandate of the Federal Reserve. Jerome Powell also stated that the presidential election would “in the near term, have no effects on our [the FOMC's] policy decisions". Subsequently, he indicated that the Committee was in no hurry to keep easing the monetary policy given the current macroeconomic conditions.
Article completed on 22 November 2024
