U.S. Growth Roars While Inflation Cools Only Gradually, Complicating Rate-Cut Politics

Key Points

• Q3 output and profits surged, pointing to a still-strong private economy.
• Inflation eased from earlier levels, but remains sticky and above comfort.
• Low jobless claims keep wage pressure alive and the Federal Reserve cautious.

The latest U.S. numbers describe an economy that is still running fast. Third-quarter GDP grew 4.4%, beating the 4.3% consensus and above 3.8% previously. Real consumer spending rose 3.5%, up from 2.5%, showing households kept buying despite higher rates.

Corporate profits climbed 4.7% quarter over quarter, above 4.4% expected and far stronger than 0.2% before. Growth looked less broad, though. GDP sales cooled to 4.5% from 7.5%, even as overall output accelerated.

Prices cooled, but not enough to declare victory. In Q3, PCE inflation ran 2.8% and core PCE 2.9%, both matching forecasts. The GDP price index held at 3.7%, sharply higher than the prior 2.1%, signaling firmer domestic price pressure.

Monthly data tell a similar story. In October, headline and core PCE rose 0.2% month over month, with both at 2.7% year over year. In November, the same 0.2% monthly pace returned, and both annual rates ticked up to 2.8%.

Consumers did not retrench. Personal spending rose 0.5% in October and again 0.5% in November. Personal income slowed to 0.1% in October, then improved to 0.3% in November, below 0.4% expected.

Even so, real personal consumption rose 0.3% in November, implying demand stayed positive after inflation. Labor-market signals stayed tight.

Initial claims were 200,000, below the 209,000 estimate and near the prior 199,000. The four-week average fell to 201,500 from 205,250. Continuing claims dropped to 1.849 million from 1.875 million, suggesting job seekers still find openings.

For Brazil and other emerging markets, this mix matters. Strong U.S. growth can keep the dollar firm and global yields elevated. Sticky inflation raises the bar for quick U.S. rate cuts, shaping flows into Latin assets.

The bottom line is simple: the economy is strong enough to resist easy policy promises. Investors heard a warning. Inflation progress is slow, and growth is firm. That mix supports tighter conditions for longer, even without new hikes.

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