US Economic Growth Projections: Key Insights for Investors and Entrepreneurs in Oman
US Economy Shows Strong Growth in Third Quarter, But Challenges Loom Ahead
WASHINGTON: The US economy is estimated to have grown robustly in the third quarter, driven by strong consumer spending and business investment. However, signs indicate that this momentum has begun to wane due to rising living costs and the recent government shutdown.
The initial estimate of third-quarter gross domestic product (GDP) from the Commerce Department, to be released on Tuesday, is expected to reveal that lower imports contributed to a reduction in the trade deficit. A significant portion of the expected increase in consumer spending is attributed to a surge in purchases of electric vehicles before the expiration of tax credits on September 30.
This data, delayed by a 43-day government shutdown, may confirm the presence of a K-shaped economy, where higher-income households thrive while middle- and lower-income households struggle to make ends meet. Recent surveys suggest that consumer spending, a key driver of the economy, is primarily being supported by affluent households who have benefited from a booming stock market.
While large corporations have largely weathered the impact of President Donald Trump’s extensive tariffs, which have led to increased costs, they are actively investing in artificial intelligence, bolstering the economy’s foundation. In contrast, smaller businesses are reportedly facing more significant challenges.
"It was a good quarter, but that is not expected to be sustainable in the fourth quarter," noted Brian Bethune, an economics professor at Boston College. "Household budgets are tight; many households are just managing to stay afloat regarding real wage gains."
Economists predict that GDP likely increased at an annualized rate of 3.3% last quarter, compared to a 3.8% growth rate in the second quarter.
The Bureau of Economic Analysis will also release its preliminary estimates for corporate profits in the third quarter, alongside gross domestic income, which measures economic growth from the income perspective.
The nonpartisan Congressional Budget Office (CBO) has projected that the recent shutdown could reduce fourth-quarter GDP by between 1.0 and 2.0 percentage points. While most of this decline is expected to be recovered eventually, the CBO estimates that between $7 billion and $14 billion may be permanently lost.
Growth in consumer spending, which accounts for over two-thirds of US economic activity, is predicted to have accelerated from a 2.5% pace in the second quarter. Factors influencing this growth include consumer demand for services such as air travel and hotel accommodations, as well as the earlier-than-usual purchases of electric vehicles.
A report from the Bank of America Institute highlights that lower-income households are increasingly living paycheck to paycheck, allocating more of their budgets to groceries instead of dining out. Furthermore, these households have cut back on spending for clothing, travel, and hotel services due to high inflation, reflecting their constrained buying power.
Conversely, higher-income households are spending more on dining, travel, and entertainment, illustrating the ongoing disparity in consumer behavior across income levels. — Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The latest US economic trends signal both opportunities and risks for businesses in Oman. With consumer spending concentrated among higher-income households, Omani entrepreneurs could capitalize on this demographic by targeting premium products and services. However, the ongoing economic challenges, particularly for lower-income segments, suggest that investors should remain cautious and focus on sustainable practices that support broader economic resilience.
