US economy grew at a rate of 2.8% last quarter, driven by consumption

The U.S. economy grew at a healthy 2.8% annual rate from July to September, with consumers driving growth despite the weight of still-high interest rates.

Wednesday’s report from the Commerce Department indicated that gross domestic product — the economy’s total goods and services — slowed slightly from its 3% growth rate in the April-June quarter. However, the numbers reflect surprising durability just as Americans assess the state of the economy in the final stretch of the presidential race.

This report is the first of three estimates that the government will make of GDP growth for the third quarter of the year. The U.S. economy has continued to expand despite much higher borrowing rates that the Federal Reserve imposed in 2022 and 2023 in its effort to control inflation. Despite widespread predictions that the economy would succumb to a recession, it has continued to grow, with employers still hiring and consumers still spending.

In a sign that the nation’s households, whose purchases drive most of the economy, will continue to spend, the Conference Board said Tuesday that its consumer confidence index posted its biggest monthly gain since March 2021. The share of consumers that expect a recession in the next 12 months fell to its lowest point since the board first raised that question in July 2022.

At the same time, the nation’s once-hot 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 its lowest level since January 2021. And employers have added an average of 200,000 jobs a month so far this year — a healthy figure but down from the record 604,000 in 2021 as the economy recovered from the pandemic recession, 377,000 in 2022 and 251,000 in 2023.

On Friday, the Labor Department is expected to report that the economy added 120,000 jobs in October. However, that increase was likely limited by the effects of hurricanes Helene and Milton and a strike at Boeing, the aviation giant, all of which temporarily left thousands of people off payrolls.

At its most recent meeting last month, the Fed was satisfied enough with its progress against inflation — and concerned enough about the labor market slowdown — to cut its benchmark rate by a robust half percentage point, its first and largest rate cut in more than four years. When it meets next week, the Fed is expected to announce another rate cut, this time by a quarter point.

The central bank’s policymakers have also signaled that they expect to reduce their key rate again at their last two meetings of this year, in November and December. And they anticipate four more rate cuts in 2025 and two in 2026. The cumulative result of the Fed’s rate cuts, over time, will likely be lower lending rates for consumers and businesses.

Inflation, which hit a four-decade high of 9.1% in June 2022, has fallen to 2.4%, just above the Fed’s 2% target. But average prices are still far above their levels. prior to the pandemic, which has exasperated many Americans and posed a challenge to Vice President Kamala Harris’ presidential prospects in her race against former President Donald Trump. However, most mainstream economists have suggested that Trump’s policy proposals, unlike Harris’s, would make inflation worse.

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