Economic growth falls in the third quarter

GDP reading: GDP growth waned to 3.7% year on year in the third quarter, from 5.3% in the second quarter. On a seasonally adjusted quarter-on-quarter basis, economic growth moderated to 0.6% in Q3, from the previous period's 1.2% rise and marking the softest expansion since Q2 2022.

Drivers: The annual deceleration was driven by a slowdown in domestic demand. Household spending increased 2.5% in the third quarter, which was below the second quarter's 4.7% expansion. Moreover, fixed investment growth waned to 1.0% in Q3, compared to 10.3% in the previous quarter. Meanwhile, public consumption remained at Q2’s 0.8% in Q3. On the external front, exports of goods and services growth accelerated to 8.2% year on year in the third quarter, which marked the best reading since Q2 2023 (Q2: +3.3% yoy). Conversely, imports of goods and services growth softened to 4.0% in Q3 (Q2: +6.2% yoy).

GDP outlook: Our Consensus is for GDP to expand at a similar pace to Q3’s in Q4, and to grow less quickly in 2025 relative to 2024 on the heels of a softer rise in fixed investment. Rising U.S. protectionism under a Trump presidency and a deterioration in domestic security are downside risks.

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