US economic growth outlook complicated by rising inflation, new data suggests

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The US economy may be growing, but so is inflation, according to new government data released Wednesday.

Gross domestic product grew at a healthy pace of 2.8% in the third quarter of 2024, according to a new government estimate, confirming an early assessment released last month. Consumer spending drove the increase, even as Americans continue to feel the pinch of high prices.

The personal consumption expenditures index, a key indicator of inflation that measures how much households spend on goods and services, also grew at an annualized rate of 2.8% in October when excluding volatile food and energy expenditures — representing an upward trend in inflation after a period of decline.

The data complicates the country’s economic outlook for the incoming Trump administration. President-elect Donald Trump has pledged to hike import duties and deport undocumented workers as soon as he takes office in January; economists have suggested those policies will cause inflation to rise, while a recent analysis from EY predicts they could consistently trim a few basis points off quarterly GDP growth for the next few years.

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The mixed reports come as the president-elect finalized his top economic team: Longtime adviser Kevin Hassett will run the National Economic Council, and trade lawyer Jamieson Greer will oversee trade. Trump also tapped the early favorite and market-friendly Scott Bessent to lead the Treasury and finance executive Howard Lutnick to head Commerce.

“Trump’s economic team is more pragmatic” than his foreign policy choices, Eurasia Group’s Ian Bremmer wrote in a note to clients. Still, “given the diversity of the group and the complexity of the policies at hand, it’s going to take some time to coordinate a strategy.”

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In December, US Federal Reserve officials will decide on whether to cut interest rates for the third and final time this year. Wall Street is largely betting on another quarter point trim, although about a third of traders anticipate no change, according to CME’s FedWatch tool. Minutes from the bank’s November meeting, released this week, also suggest more rate cuts are coming and that the central bankers are still confident they can bring inflation down to the target 2%.

Trump’s reelection complicates the Fed’s trajectory, as his policies could stoke inflation. But at the last meeting, the central bank’s chair Jerome Powell pushed back on the idea that the incoming administration should factor into the Fed’s decision-making: “We don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy would be.”