The United States economy posted another solid period of growth in the third quarter of this year, propelled higher by strong consumer spending that has defied expectations for a slowdown.
Gross domestic product, a measure of all the goods and services produced during the three-month period from July through September, increased at a 2.8% annualized rate, according to a Commerce Department report Wednesday. Economists surveyed by Dow Jones had been looking for an increase of 3.1%.
Wednesday’s reading is the first of three the department will issue.
The report confirms that the U.S. expansion has continued despite elevated interest rates and long-standing worries that the burst of fiscal and monetary stimulus that carried the economy through the Covid crisis wouldn’t be enough to sustain growth.
However, resilient consumer spending, which accounts for about two-thirds of all activity, has helped keep the economy moving, as has a relentless wave of government spending that pushed the budget deficit to more than $1.8 trillion in fiscal 2024.
Personal consumption expenditures, the proxy for consumer activity, increased 3.7% for the quarter, the strongest performance since Q1 of 2023, contributing nearly 2.5 percentage points to the total.
Another major factor the department cited for growth was federal government spending, which exploded higher by 9.7%, pushed by a 14.9% surge in defense outlays. Fiscal spending at the federal level contributed 0.6 percentage point to the GDP growth rate.
Markets showed little reaction to the data. However, with the report published less than a week before Americans head to the polls on November 5, the data is a conversation point. While polls show the Presidential race is a toss-up, the health of the economy is top of mind for Americans, who have grumbled about high food and housing costs.
Related: How Presidential Elections Affect The Stock Market
All in all, the economy has stayed resilient despite 5.25 percentage points of interest rate increases in 2022 and 2023 from the Federal Reserve to tame inflation.
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