US economy grows at 2.8% in Q3 on consumer spending, exports surge

The American economy expanded at a healthy 2.8 per cent annual pace from July through September on strong consumer spending and a surge in exports, the government said Wednesday, leaving unchanged its initial estimate of third-quarter growth.

The Commerce Department reported that growth in US gross domestic product the economy's output of goods and services slowed from the April-July rate of 3 per cent.

But the GDP report still showed that the American economy the world's largest is proving surprisingly durable. Growth has topped 2 per cent for eight of the last nine quarters.

Still, American voters exasperated by high prices were unimpressed by the steady growth and chose this month to return Donald Trump to the White House to overhaul the nation's economic policies. He will be supported by Republican majorities in the House and Senate.

Consumer spending, which accounts for about 70 per cent of US economic activity, accelerated to a 3.5 per cent per cent annual pace last quarter, up from 2.8 per cent in the April-June period and fasted growth since the first quarter of 2023. Exports also contributed to the third quarter's growth, increasing at a 7.5 per cent rate, most in two years. Still, the third-quarter growth in both consumer spending and exports was lower than the Commerce Department initially estimated.

But growth in business investment slowed sharply on a drop in investment in housing and in nonresidential buildings such as offices and warehouses. By contrast, spending on equipment surged.

When he takes office next month, President-elect Trump will inherit an economy that looks broadly healthy.

Growth is steady. Unemployment is low at 4.1 per cent. Inflation, which hit a four-decade high 9.1 per cent in June 2022, has fallen to 2.6 per cent. That is still above the Federal Reserve's 2 per cent target, but the central bank felt satisfied enough with the progress against inflation to cut its benchmark interest rate in September and again this month. Most Wall Street traders expect the Fed to cut rates again in December.

The public still feels inflation's sting: Prices are about 20 per cent higher than they were in February 2021, just before inflation started picking up  Trump has promised an economic shakeup. On Monday, for example, he vowed to slap new import taxes on goods from China, Mexico and Canada. Mainstream economists view such taxes or tariffs as inflationary. That is because they are paid by US importers, who then seek to pass along the higher costs to their customers.

Wednesday's report was the second of three looks at third-quarter GDP. The Commerce Department will issue the final report on Dec 19.