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Gross Domestic Product (GDP) grew by 1.9% in the third quarter, which came in above expectations of 1.6%. Many of the same characteristics carried over from the Q2 report such as growth in consumer spending and continued weakness in business investment. One notable change was a surprise return to growth in residential housing investment. As was the case in Q2, consumer spending was the largest contributor to GDP growth in the quarter, contributing 1.9% to the aggregate growth figure. However, consumer spending growth declined by nearly a third from Q2 to Q3 from 4.6% to 2.9%, which makes some sense given all of the current headlines that may be weighing on consumer confidence. As alluded to earlier, the business investment contraction worsened to -3.0% from -1.0% in Q3 from Q2 led by continued slowdowns in equipment and structure investment. This continued worsening in business investment is, to some degree, expected given the current economic and geopolitical uncertainties that business managers are up against. As discouraging as business investment was, residential housing growth made a great effort to bring some positivity to the gross private domestic investment segment. Residential housing delivered its second quarter of growth in the last 10 quarters, which is an encouraging sign that the current Fed rate cutting program is enticing consumers to get back in the housing market. Net exports detracted 0.08% from GDP growth as exports grew 0.7% in the quarter compared to 1.2% growth in imports, and although the dollar has marginally weakened recently, it still is a headwind to net exports. Lastly, government spending grew 2.0% and contributed 0.4% to GDP growth, led by federal government spending growth of 3.4%. Consistent with many other recent economic data releases, the GDP report showed that the U.S. economy is growing, albeit at a slower rate, and although consumer spending growth slowed, the consumer is who we will continue to look for growth.
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