The U.S. economy experienced another period of solid growth in the third quarter, driven by strong consumer spending that surpassed expectations for a slowdown. Gross domestic product (GDP) increased at a 2.8% annualized rate from July to September, as reported by the Commerce Department. Economists had anticipated a 3.1% increase, following a 3% growth rate in the second quarter. This report is the first of three that the department will release.
Despite concerns about high interest rates and the sustainability of growth post-Covid, the U.S. economy has continued to expand. Consumer spending, which makes up a significant portion of economic activity, remained robust. Government spending also played a crucial role, with federal expenditures increasing by 9.7%, contributing to GDP growth.
However, a notable increase in imports and a decrease in exports hindered overall growth. The markets showed a muted response to the data, with stock market futures indicating a mixed opening. The Federal Reserve is expected to further reduce interest rates, despite the strong economy and inflation above target but lower than previous levels.
Inflation, as measured by the personal consumption expenditures price index, rose 1.5% in the quarter, below the Fed’s 2% target. Core inflation, excluding food and energy, increased by 2.2%. Consumers have been using savings and credit to support their spending, with the personal savings rate declining to 4.8% in the third quarter.
The economic landscape is set against the backdrop of the U.S. presidential race, with Democrat Kamala Harris and Republican Donald Trump in a close contest. Harris highlights the ongoing economic strength, while Trump points to past inflation levels. Despite fluctuations, the economy has shown consistent growth over the past quarters.
