Intelligent Investment
Economic Watch: Q3 GDP Slows But Remains Strong
October 30, 2024 3 Minute Read
Executive Summary
- U.S. GDP increased by 2.8% on an annualized basis in Q3 2024, down from 3.0% in Q2 and below market expectations of 3.1%. However, growth remained well above its long-term average.
- Strong growth was accompanied by easing inflation, with the Personal Consumption Expenditures (PCE) Price Index falling to 1.5% annualized in Q3, well below the Fed’s 2.0% target. The Core PCE Price Index, which excludes food and energy, increased by 2.2%, down from 2.8% in Q2.
- CBRE expects relatively strong economic growth to continue in H1 2025 and then ease as the year progresses.
- We expect that inflation will continue to fall, allowing the Fed to continue cutting interest rates this year and next.
The Bottom Line
Increases in consumer spending, nonresidential investment and government expenditures contributed to above-trend GDP growth in Q3. Personal consumption expenditures increased by 3.7%, the strongest quarter since Q1 2023, while government spending rose by 9.7% and non-residential investment was up by 3.3%. The U.S. trade deficit was a mild drag on growth, reflecting lower exports due to weakness in the global economy.
CBRE Outlook
Our base case scenario continues to anticipate a soft landing for the U.S. economy, with lower inflation and a more balanced labor market in Q4 and throughout 2025. However, there is a growing chance that economic growth will be stronger than expected.
With lower inflation, we expect the Fed will further cut interest rates by 25 bps both next week and in December. We expect economic growth driven in part by government spending will keep the 10-year Treasury yield modestly above 4% over the near term.
CBRE expects that industrial and office leasing activity will increase modestly this year and next. High long-term interest rates will remain a headwind for capital markets activity. Nevertheless, we expect the recovery in volumes to improve notably in 2025.
Figure 1: CBRE House View
