US Economy Expands 2.8% In Q3, Driven By Strong Consumer Spending

Despite the slowdown, the report highlights the surprising resilience of the world’s largest economy, with growth exceeding 2 per cent in eight of the last nine quarters

US gross domestic product (GDP), which measures the economy’s output of goods and services, slowed to 2.8 per cent in the July-September period

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The US economy grew at a robust annual rate of 2.8 per cent from July to September, driven by solid consumer spending and a surge in exports, the government reported on Wednesday. This figure matches the initial estimate for third-quarter growth.

US gross domestic product (GDP), which measures the economy’s output of goods and services, slowed to 2.8 per cent in the July-September period, down from 3 per cent in the previous quarter, the Commerce Department reported on Wednesday.

Despite this slowdown, the report highlights the surprising resilience of the world’s largest economy, with growth exceeding 2 per cent in eight of the last nine quarters.

The GDP data revealed that a critical measure of the economy’s underlying strength grew at a solid annual rate of 3.2 per cent from July to September, up from 2.7 per cent in the previous quarter. This measure excludes volatile factors such as exports, inventories, and government spending and includes consumer spending and private investment.

However, many American voters, frustrated by high prices, were not satisfied with the economic performance despite steady growth. This month, they chose to bring Donald Trump back to the White House in hopes of overhauling the nation’s economic policies. He will be supported by Republican majorities in both the House and Senate.

Consumer spending, which drives about 70 per cent of US economic activity, accelerated to a 3.5 per cent annual rate in the third quarter, up from 2.8 per cent in April-June. This marked the fastest growth since the fourth quarter of 2023. Exports also played a role in the growth, rising at a 7.5 per cent rate, the strongest increase in two years. However, consumer spending and exports grew less than initially estimated by the Commerce Department.

On the other hand, business investment saw a sharp slowdown, mainly due to declines in housing and nonresidential buildings like offices and warehouses. However, spending on equipment surged during the period.

As President-elect Trump prepares to take office next month, he will inherit a broadly healthy economy. Economic growth remains steady, unemployment is low at 4.1 per cent, and inflation has fallen significantly from its peak of 9.1 per cent in June 2022 to 2.6 per cent. While still above the Federal Reserve’s 2 per cent target, inflation has improved enough for the central bank to cut its benchmark interest rate in September and again this month. Most Wall Street traders expect the Fed to lower rates further in December.

The report also provided positive news on inflation. The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index, rose at just a 1.5 per cent annual pace last quarter, down from 2.5 per cent in the previous quarter. Excluding volatile food and energy prices, the core PCE inflation rate dropped to 2.1 per cent from 2.8 per cent in the second quarter.

Despite overall economic stability, the public still feels the effects of inflation, with prices about 20 per cent higher than they were in February 2021, just before inflation began to surge.