WASHINGTON (AP) — The U.S. economy grew at a healthy 2.8% annual rate from July to September, with consumers driving growth despite the still burden of high interest rates.
Gross domestic product, the economy’s total output of goods and services, slowed slightly from the 3% growth rate in the April-June period, according to a report released Wednesday by the Commerce Department. But just as Americans are assessing the state of the economy in the final stages of the presidential election, the latest numbers still reflect surprising persistence.
Consumer spending, which accounts for about 70% of U.S. economic activity, accelerated to an annualized rate of 3.7% last quarter, up from 2.8% in the April-June period. Exports also contributed to growth in the third quarter, increasing by 8.9%.
On the other hand, investment in housing and non-residential buildings such as offices and warehouses decreased, and growth in capital investment slowed significantly. But spending on equipment soared.
Wednesday’s report also contained some encouraging news on inflation. The Fed’s preferred inflation measure, known as the Personal Consumption Expenditure Index (PCE), rose just 1.5% annually last quarter, down from 2.5% in the second quarter and the lowest rate in more than four years. So-called core PCE inflation, which excludes volatile food and energy prices, was 2.2%, down from 2.8% in the April-June period.
The report is the first of three estimates the government will make of GDP growth in the third quarter of this year. The U.S. economy is set to decline in 2022 and 2023, when the Federal Reserve aims to rein in inflation that soared as the U.S. rebounded with unexpected strength from a brief but devastating COVID-19 recession. It has continued to expand despite charging significantly higher borrowing rates in 2017. Despite widespread predictions that the economy would enter a recession, employers continue to hire, consumers continue to spend, and the economy continues to grow. And as inflation steadily declined, the Fed began lowering interest rates.
Ryan Sweet, chief U.S. economist at Oxford Economics, said the report "sends a clear message that the economy is strong and inflation is moderating, which is good news for the Federal Reserve.” Ta.
The sector of GDP data that measures the underlying strength of the economy rose steadily from July to September at an annual rate of 3.2%, up from 2.7% in the April-June period. This category includes personal consumption and private investment, but excludes volatile items such as exports, inventories, and government spending.
President Joe Biden said: “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.” said.
Other recent economic reports have also noted that the economy remains healthy. Consumer confidence posted its biggest monthly increase since March 2021, the Conference Board said on Tuesday, in a sign that households continue to spend, with purchasing activity driving much of the economy. The percentage of consumers who expect an economic recession has been announced. This is the lowest level in 12 months since the board first raised the question in July 2022.
At the same time, the country’s once-booming job market is losing momentum. On Tuesday, the government reported that U.S. job openings in September fell to the lowest level since January 2021. And employers have added an average of 200,000 jobs per month so far this year, a healthy number but down from the same period last year. It hit 604,000 in 2021, 377,000 in 2022 and 251,000 in 2023 as the economy recovered from the pandemic recession.
On Friday, the Labor Department is expected to report that economic growth added 120,000 jobs in October. However, that increase would probably have been significantly dampened by the impact of hurricanes Helen and Milton and a strike at airline giant Boeing. Both temporarily put thousands of employees out of work.
Despite continued increases in inflation, average prices remain well above pre-pandemic levels, which has angered many Americans and led to concerns about Kamala Trump’s campaign against former President Donald Trump. That poses challenges to Vice President Harris’ prospects. But many mainstream economists, unlike Harris, suggest that Trump’s policy proposals would worsen inflation.
At its most recent meeting last month, the Fed was sufficiently satisfied with the progress made in combating inflation and sufficiently concerned about the slowing job market that it slashed its benchmark interest rate by half a percentage point, the first and largest rate cut in more than four times. It became. year. At its board meeting next week, the Fed is expected to announce another rate cut, this time by a more typical quarter-point cut.
Central bank policymakers also signaled they expect to cut the key policy rate again at the last two meetings of the year, in November and December. And they envision four more rate cuts in 2025 and two in 2026. The cumulative result of the Fed’s rate cuts is likely to be lower borrowing rates for consumers and businesses over time.
