The U.S. economy posted another solid but somewhat disappointing period of growth in the third quarter, fueled by strong consumer spending that defied expectations of a slowdown.
Gross domestic product, a measure of all goods and services produced from July through September, rose at an annual rate of 2.8%, according to a Commerce Department report adjusted for inflation and seasonal effects on Wednesday.
Economists polled by Dow Jones had expected a 3.1% increase. The economy accelerated at a 3% pace in the second quarter.
The report confirms that the U.S. expansion has continued despite high interest rates and longstanding concerns that the burst of fiscal and monetary stimulus that has helped the economy through the Covid crisis would not be enough to sustain growth..
But resilient consumer spending, which accounts for about two-thirds of all activity, has helped keep the economy afloat, as has a relentless wave of government spending that has pushed the budget deficit to more than $1.8 trillion in fiscal 2024.
Personal consumption expenditures, the proxy for consumer activity, rose 3.7% for the quarter, the strongest performance since Q1 2023. Another key factor the department cited for growth was federal government spending, which jumped 9.7%, driven by a 14.9% increase in defense spending.
However, an 11.2% jump in imports, which are subtracted from GDP, held back the growth figure, offsetting an 8.9% rise in exports.
The release comes as the Federal Reserve looks set to cut inflation further, despite the economy’s apparent strength and inflation that remains above target but far from peaking in mid-2022.
Markets are broadly expecting the Fed to cut another quarter percentage point from its benchmark short-term lending rate when policymakers wrap up their two-day meeting on Nov. 7.