The U.S. economy grew at a healthy 3.1% annual pace from July to September, boosted by vigorous consumer spending and a rise in exports, the government said in an upward revision to its previous estimate.
Growth in gross domestic product (GDP) — the economy’s output of goods and services — accelerated from the April-July rate of 3% and continued to be strong despite high interest rates, the Commerce Department said. on Thursday. GDP growth has now exceeded 2% in eight of the last nine quarters.
Consumer spending, which accounts for about two-thirds of U.S. economic activity, expanded at a pace of 3.7%, the fastest since the first quarter of 2023 and an increase from the previous estimate for the third quarter of 2023. 3.5%.
Exports increased by 9.6%. Business investment grew a modest 0.8%, but equipment investment expanded 10.8%. Federal government spending and investment jumped 8.9%, including a 13.9% increase in defense spending.
American voters were unimpressed by the steady growth under Democratic President Joe Biden. Exasperated by prices that remain 20% higher than they were when an inflationary surge began in early 2021, they chose last month to send Donald Trump back to the White House with Republican majorities in the House and Senate. .
Trump will inherit an economy that appears generally healthy. The unemployment rate remains low at 4.2% although it has risen from a 53-year low of 3.4% hit in April 2023. Inflation hit a four-decade high of 9.1% in mid-2022. . Eleven interest rate increases by the Federal Reserve in 2022 and 2023 helped reduce it — to 2.7% last month. That’s above the Fed’s 2% target. But the central bank still felt comfortable enough with progress against inflation to cut its benchmark rate on Wednesday for the third time this year.
Within the GDP data, a category that measures the underlying strength of the economy grew at a solid annual pace of 3.4% from July to September, an improvement from the previous estimate and an increase from 2.7% in the quarter from April to June. This category includes consumer spending and private investment, but excludes volatile items such as exports, inventories, and government spending.
Wednesday’s report also contained some encouraging news on inflation. The Fed’s preferred gauge of inflation — called the personal consumption expenditures index — rose at an annual pace of just 1.5% last quarter, falling from 2.5% in the second quarter. Excluding volatile food and energy prices, core inflation for that index was 2.2%, a modest increase from the previous estimate but a decline from 2.8% in the April-June quarter.
Thursday’s report was the Commerce Department’s third and final look at third-quarter GDP. It will release its initial estimate of October-December growth on January 30.
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