U.S. economy grew at 2.8% pace, signaling continued strength days ahead of election

WASHINGTON - The U.S. economy continued its expansion in the third quarter, growing at a slightly slower annualized rate of 2.8 percent and reinforcing a rosy lens of the economy days before the elections.

The latest gross domestic product report, released Wednesday by the Commerce Department’s Bureau of Economic Analysis, offers a snapshot of an economy that’s been able to withstand policy swings and political uncertainty. Growth moderated from the previous quarter’s 3 percent reading but remains sturdy.

“The U.S. economy is now in a very good spot and is characterized by full employment, price stability and strong productivity gains,” said Joe Brusuelas, chief economist at RSM. Even with the gradual slowdown, the U.S. economy is still “firing on all cylinders,” he said.

Consumers are fueling much of that momentum with spending that has outlasted even the most optimistic forecasts. Despite inflation, Americans have continued to shell out for a range of goods and services, including cars, dining out and travel.

However, there are pockets of softness. A dip in housing investments, a slowdown in inventory purchases and a rise in imports all dragged down the latest reading. Many economists expect growth to decelerate later this year and into 2025, as state and local governments dial back their spending.

Americans are seeing smaller income gains and are saving less than they were earlier in the year, the data shows. The personal savings rate — which measures how much money Americans are able to set aside — dropped to 4.8 percent from 5.2 percent in the previous quarter.

Still, consumers, businesses and the government have kept spending and investing despite high interest rates and political uncertainty, which has helped bolster the economy beyond what economists had predicted even a few months ago. Gross domestic product, which measures the goods and services in the United States, has increased for 10 straight quarters.

“We did not expect growth to be this strong this year,” said Luke Tilley, chief economist at Wilmington Trust. “It really is a testament to consumer spending and to the fact that U.S. firms have been incredibly productive and innovative in dealing with the challenges of higher interest rates and labor costs.”

By many accounts, the economy is bustling: Companies are hiring, wages are rising and Americans are spending heartily. Quarterly GDP growth during Joe Biden’s presidency has averaged 3.2 percent. That’s compared with 2.5 percent annualized growth in the first three years of Trump’s presidency, before pandemic-related disruptions.

After raising interest rates aggressively in response to covid-related inflation, the Federal Reserve last month began cutting borrowing costs and is expected to do so again next week. Economists say that should help breathe life into the housing market and spur further investments by both households and businesses. (Source: The Washington Post)