The US economy grew at a strong pace of 2.8% in the last quarter thanks to strong consumer spending

WASHINGTON (AP) — The U.S. economy grew at a healthy annual rate of 2.8% in the July-September period, as consumers helped drive growth despite the weight of still-high interest rates.

Wednesday's report from the Commerce Department said gross domestic product — the economy's total output of goods and services — slowed slightly from its 3% growth rate in the April-June quarter. But the latest numbers still reflect surprising resilience, just like the Americans Assessing the state of the economy In the final stage of the presidential race.

Consumer spending, which represents about 70% of US economic activity, accelerated to a 3.7% annual pace in the fourth quarter, up from 2.8% in the April-June period. Exports also contributed to third-quarter growth, increasing by 8.9%.

On the other hand, business investment growth slowed sharply due to a decline in investment in housing and non-residential buildings such as offices and warehouses. But spending on equipment has risen.

Wednesday's report also included some encouraging news on inflation. The Fed's preferred measure of inflation — called the personal consumption expenditures index, or PCE — rose at an annual rate of just 1.5% in the latest 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 personal consumption expenditures inflation was 2.2%, down from 2.8% in the April-June quarter.

This report is the first of three estimates that the government will make regarding GDP growth for the third quarter of the year. The US economy continued to expand in the face of the crisis Much higher borrowing rates The Federal Reserve imposed its imposition in 2022 and 2023 as part of its efforts to curb inflation, which has risen as the United States rebounded unexpectedly strongly from the short and devastating COVID-19 recession in 2020. Despite widespread expectations that the economy will succumb to recession, It continues to grow, as employers continue to hire and consumers continue to spend. As inflation steadily slowed, the Federal Reserve began lowering interest rates.

Ryan Sweet, chief US economist at Oxford Economics, said the report “sends a clear message that the economy is in good shape and that inflation is moderating – which is good news for the Fed.”

Within the GDP data, the category that measures the underlying strength of the economy rose at a strong annual rate of 3.2% in the July-September period, up from 2.7% in the April-June quarter. This category includes consumer spending and private investment but excludes volatile items such as exports, inventories, and government spending.

“Today’s GDP report shows how far we have come since I took office — from the worst economic crisis since the Great Depression to the strongest economy in the world,” President Joe Biden said.

Other recent economic reports also indicated that the economy remains healthy. In a sign that the country's households, whose purchases drive most of the economy, will continue spending, the Conference Board said on Tuesday Consumer confidence index It posted its biggest monthly gain since March 2021. The share of consumers anticipating a recession in the next 12 months fell to its lowest level since the board first asked that question in July 2022.

At the same time, the country's once vibrant labor market has lost some momentum. The number of job openings in the United States fell in September to… Lowest level since January 2021. Employers have added an average of 200,000 jobs a month so far this year — a healthy number but below the record 604,000 in 2021 as the economy rebounds from the pandemic recession, 377,000 in 2022 and 251,000 in 2023.

The Labor Department is expected to announce on Friday that the economy added 120,000 jobs in October. But this gain was likely significantly reduced by the effects of Hurricanes Helen and Milton and by the strike at Boeing, the aviation giant, all of which led to thousands of people temporarily stopping their salaries.

Despite continued progress on inflation, average prices remain far above pre-pandemic levels, which has irritated many Americans and challenged the prospects of Vice President Kamala Harris in her race against former President Donald Trump. However, most mainstream economists have pointed out that Trump's policy proposals, unlike Harris's, This would exacerbate inflation.

At its last meeting last month, the Fed was satisfied enough with the progress it had made against inflation — and concerned enough about the labor market slowdown — that it cut its benchmark interest rate by 100%. Half a percentage point is hugeThis is the first and largest interest rate cut in more than four years. When the Fed meets next week, it is expected to announce another interest rate cut, a typical quarter-point.

Central bank policymakers also indicated they expect to cut the key interest rate again at their last two meetings this year, in November and December. They envision four more rate cuts in 2025 and two in 2026. The cumulative result of the Fed's rate cuts, over time, is likely to be lower borrowing rates for consumers and businesses.