The U.S. economy grew at a healthy 2.8% annual rate from July through September, with consumers helping drive growth despite the weight of still-high interest rates.<\/p>\n
Wednesday\u2019s report from the Commerce Department said the gross domestic product \u2014 the economy\u2019s total output of goods and services \u2014 did slow slightly from its 3% growth rate in the April-June quarter. But the latest figures still reflect surprising durability just as Americans\u00a0assess the state of the economy<\/a>\u00a0in the final stretch of the presidential race.<\/p>\n Consumer spending, which accounts for about 70% of U.S. economic activity, accelerated to a 3.7% annual pace last quarter, up from 2.8% in the April-June period. Exports also contributed to the third quarter’s growth, increasing at an 8.9% rate.<\/p>\n On the other hand, growth in business investment slowed sharply on a drop in investment in housing and in nonresidential buildings such as offices and warehouses. But spending on equipment surged.<\/p>\n Wednesday\u2019s report also contained some encouraging news on inflation. The Federal Reserve’s favoured inflation gauge \u2014 called the personal consumption expenditures index, or PCE \u2014 rose at just a 1.5% annual pace last quarter, down from 2.5% in the second quarter and the lowest figure in more than four years. Excluding volatile food and energy prices, so-called core PCE inflation was 2.2%, down from 2.8% in the April-June quarter.<\/p>\n The report is the first of three estimates the government will make of GDP growth for the third quarter of the year. The U.S. economy has continued to expand in the face of the\u00a0much higher borrowing rates<\/a>\u00a0the Fed imposed in 2022 and 2023 in its drive to curb the inflation that surged as the United States bounced back with unexpected strength from the brief but devastating COVID-19 recession of 2020. Despite widespread predictions that the economy would succumb to a recession, it has kept growing, with employers still hiring and consumers still spending. And with inflation steadily cooling, the Fed has begun to cut interest rates.<\/p>\n The report \u201csends a clear message that the economy is doing well, and inflation is moderating \u2014 good news for the Federal Reserve,\u2019\u2019 said Ryan Sweet, chief U.S. economist at Oxford Economics.<\/p>\n Within the GDP data, a category that measures the economy\u2019s underlying strength rose at a solid 3.2% annual rate 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 like exports, inventories and government spending.<\/p>\n “Today\u2019s GDP report shows how far we\u2019ve come since I took office\u2014from the worst economic crisis since the Great Depression to the strongest economy in the world,” President Joe Biden said.<\/p>\n Other recent economic reports have also pointed to a still-healthy economy. In a sign that the nation\u2019s households, whose purchases drive most of the economy, will continue spending, the Conference Board said Tuesday that its\u00a0consumer confidence index\u00a0<\/a>posted its biggest monthly gain since March 2021. The proportion of consumers who expect a recession in the next 12 months dropped to its lowest point since the board first posed that question in July 2022.<\/p>\n At the same time, the nation\u2019s once-sizzling job market has lost some momentum. On Tuesday, the government reported that the number of job openings in the United States fell in September to\u00a0its lowest level since January 2021<\/a>. And employers have added an average of 200,000 jobs a month so far this year \u2014 a healthy number but down from a record 604,000 in 2021 as the economy rebounded from the pandemic recession, 377,000 in 2022 and 251,000 in 2023.<\/p>\n On Friday, the Labor Department is expected to report that the economy added 120,000 jobs in October. That gain, though, will probably have been significantly held down by the effects of Hurricanes Helene and Milton and by a strike at Boeing, the aviation giant, all of which temporarily knocked thousands of people off payrolls.<\/p>\n Despite the continued progress on inflation, average prices still far exceed their pre-pandemic levels, which has exasperated many Americans and posed a challenge to Vice President Kamala Harris\u2019 prospects in her race against former President Donald Trump. Most mainstream economists have suggested, though, that Trump\u2019s policy proposals, unlike Harris,\u2019 would worsen inflation<\/a>.<\/p>\n