WASHINGTON (AP) – The American economy expanded at a healthy 2.8 per cent annual pace from July through September on strong consumer spending and a surge in exports, the government said on Wednesday, leaving unchanged its initial estimate of third-quarter growth.
United States (US) gross domestic product (GDP) – the economy’s output of goods and services – slowed from the April-July rate of three per cent, the Commerce Department reported on Wednesday.
But the GDP report still showed that the American economy – the world’s largest – is proving surprisingly durable. Growth has topped two per cent for eight of the last nine quarters. Within the GDP data, a category that measures the economy’s underlying strength rose at a solid 3.2 per cent annual rate from July through September, up from 2.7 per cent in the April-June quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Still, American voters – exasperated by high prices – were unimpressed by the steady growth and chose this month to return Donald Trump to the White House to overhaul the nation’s economic policies. He will be supported by Republican majorities in the House and Senate.
Consumer spending, which accounts for about 70 per cent of US economic activity, accelerated to a 3.5 per cent annual pace last quarter, up from 2.8 per cent in the April-June period and fastest growth since the fourth quarter of 2023.
Exports also contributed to the third quarter’s growth, increasing at a 7.5 per cent rate, most in two years. Still, the third-quarter growth in both consumer spending and exports was lower than the Commerce Department initially estimated.
But growth in business investment slowed sharply on a drop in investment in housing and in nonresidential buildings such as offices and warehouses. By contrast, spending on equipment surged.
When he takes office next month, President-elect Trump will inherit an economy that looks broadly healthy.
Growth is steady. Unemployment is low at 4.1 per cent. Inflation, which hit a four-decade high 9.1 per cent in June 2022, has fallen to 2.6 per cent. That is still above the Federal Reserve’s (Fed) two per cent target, but the central bank felt satisfied enough with the progress against inflation to cut its benchmark interest rate in September and again this month. Most Wall Street traders expect the Fed to cut rates again in December.
Wednesday’s report also contained some encouraging news on inflation. The Fed’s favoured inflation gauge – called the personal consumption expenditures index (PCE) – rose at just a 1.5 per cent annual pace last quarter, down from 2.5 per cent in the second quarter. Excluding volatile food and energy prices, so-called core PCE inflation was 2.1 per cent, down from 2.8 per cent in the April-June quarter.
The public still feels inflation’s sting: Prices are about 20 per cent higher than they were in February 2021, just before inflation started picking up.
