US economy grows at 2.8% pace in third quarter on consumer spending, unchanged from first estimate
WASHINGTON — The US economy grew at a healthy 2.8% annual rate from July through September strong consumer spending and a rise in exports, the government said on Wednesday, leaving unchanged its initial estimate of third-quarter growth.
U.S. gross domestic product — the economy’s output of goods and services — slowed from 3% between April and July, the Commerce Department reported Wednesday.
But the GDP report still shows that the US economy – the largest in the world – is proving to be surprisingly sustainable. Growth has exceeded 2% in eight of the past nine quarters.
Within the GDP data, a category measuring the economy’s underlying strength rose a solid 3.2% year-on-year from July through September, up from 2.7% in the April-June quarter. This category includes consumer spending and private investment, but excludes volatile items such as exports, inventories and government spending.
Yet American voters – irritated by high prices – were unimpressed by the steady growth and this month opted to send Donald Trump back to the White House to review the country’s economic policy. He will be supported by the Republican majorities in the House of Representatives and the Senate.
Consumer spending, which accounts for about 70% of U.S. economic activity, accelerated to an annualized rate of 3.5% last quarter, up from 2.8% in the April-June period and the fastest growth since the fourth quarter of 2023. Exports also contributed to the third quarter. quarterly growth, up 7.5%, the most in two years. Still, third-quarter growth in both consumer spending and exports was lower than the Commerce Department initially estimated.
But business investment growth slowed sharply due to a decline in investment in housing and in non-residential buildings such as offices and warehouses. In contrast, expenditure on equipment increased dramatically.
When he takes office next month, President-elect Trump will inherit an economy that looks broadly healthy.
Growth is stable. Unemployment is low: 4.1%. Inflation, which reached a four-decade high of 9.1% in June 2022, has fallen to 2.6%. That’s still above the Federal Reserve’s 2% target, but the central bank was satisfied enough with progress in the fight against inflation to cut rates in September and again this month. Most Wall Street traders expect the Fed to cut rates again in December.
Wednesday’s report also contained encouraging news on inflation. The Federal Reserve’s favorite inflation gauge — called the personal consumption expenditure index, or PCE — rose just 1.5% annually last quarter, down from 2.5% in the second quarter. Excluding volatile food and energy prices, so-called core PCE inflation stood at 2.1%, compared with 2.8% in the April-June quarter.
The public is still feeling the sting of inflation: Prices are about 20% higher than in February 2021, just before inflation started to pick up
Trump has promised an economic shake-up. On Monday, for example, he promised to impose new import taxes on goods from China, Mexico and Canada. Mainstream economists consider such taxes – or rates – to be inflationary. That’s because they are paid by US importers, who then try to pass the higher costs on to their customers.
Wednesday’s report was the second of three looks at third-quarter GDP. The Commerce Department will release the final report on December 19.
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This story has been corrected to show that consumer spending increased at the fastest pace since the fourth quarter, not the first quarter, of 2023.