By Paul gomme and peter rupert
The BEA announced that real GDP for the 3rd quarter showed strong growth, rising 4.3% on a seasonally adjusted annualized basis. This is the highest growth since Q3 of 2023. Consumption growth led the charge, increasing 3.5%.
While consumption has been strong, investment has not. Outside of the large swings, likely due to tariff announcements, investment has been dismal over the past year, declining three times in the past five quarters.
Policy Implications
Members of the FOMC wishing to hold interest rates fixed (or even raise them) will, no doubt, point to the high real output and consumption growth. Those advocating lower rates will emphasize the fall in investment as well as the weak jobs growth between September and November and the increase in the unemployment rate. Much rides on the core PCE inflation rate. Data for November was supposed to be released on December 19, but has been delayed; the next (scheduled) release is for December 2025 (not November) on January 29, 2026. That will not leave much time to digest the incoming inflation data since the next FOMC meeting is January 30-31. We will see where the FOMC comes down on the potential “risks” to the economy in terms of inflation and the real side of the economy.
