The economy grew solidly again in the third quarter, bolstering the belief that the U.S. can dodge a recession and raising the odds the Federal Reserve will cut interest rates more modestly in the months ahead.
More sturdy consumer and business spending gains more than offset a drop in housing construction and a widening trade deficit.
The nation’s gross domestic product, the value of all goods and services produced in the U.S., expanded at a seasonally adjusted annual rate of 2.8% in the July-to-September period, the Commerce Department said Wednesday. That’s down slightly from a 3% increase in the second quarter and 2.9% for all of 2023.
Economists surveyed by Bloomberg had forecast a 3% rise in output.
The report is the final broad snapshot of the economy before a historic election in which it has become a top issue. While economic growth has been healthy under President Joe Biden and Vice President Kamala Harris, the Democratic presidential nominee, Americans continue to be rankled by high inflation over the past few years. And 46% said former President Donald Trump had a better approach to the economy, compared with 38% who favored Harris, according to a Reuters/Ipsos poll this month.
"Overall, the U.S. economy appears to be doing just fine," economist Paul Ashworth of Capital Economics wrote in a note to clients. He added, however, that Wednesday's report doesn't reflect the effects of Hurricanes Helene and Milton that hit the Southeast in late September and early October as well as the Boeing workers strike that began in September. Those impacts will likely show up in the report on fourth-quarter growth.
Is the US economy doing well right now?
Despite high inflation and interest rates in the past few years, the economy has proven remarkably resilient, with robust wage gains propping up consumer spending and job growth.
Are consumers still spending money?
In the third quarter, consumption increased at an annual rate of 3.7%, above the 2.8% pace in the second quarter. Consumer spending makes up about 70% of economic activity.
An immigration surge has supplied a steady stream of workers to the job market, Goldman Sachs said, underpinning spending and easing labor shortages as baby boomers retire in large numbers.
But to cope with higher prices, Americans, particularly low- to middle-income households, have racked up record credit card debt and pushed delinquencies to a 13-year high. Lower-income consumers have depleted the money they socked away during the COVID-19 pandemic from stimulus checks and staying home.