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The US economy grew at an annualised rate of 2.8 per cent in the third quarter, in the latest sign American consumers remain resilient ahead of the US presidential election.
The data on Wednesday from the Bureau of Economic Analysis showed GDP growth fell slightly short of economists’ estimates for a 3 per cent expansion and was just shy of the 3 per cent rate registered the previous quarter.
Evidence of the US economy’s resilience comes just days before Americans vote to elect the country’s new president. Kamala Harris, the Democratic vice-president, has touted the current administration’s handling of the economy, although her opponent Donald Trump has blamed it for inflation and high living costs.
The GDP figures come a week before the Federal Reserve is set to meet to decide on interest rates, having kicked off its easing cycle last month with a larger-than-usual half-point cut.
Wednesday’s report, showing the continued streak of GDP growth, reflected the willingness of American consumers to keep opening their wallets, despite lingering inflation pressures.
Consumer spending accelerated to 3.7 per cent, while one closely watched proxy for demand that strips out inventories, trade and government spending — called final sales to domestic private purchasers — jumped to 3.2 per cent from 2.7 per cent in the last quarter. Residential investment, however, slipped by 5.1 per cent.
“Where it counts, growth performed incredibly well in the third quarter,” said Tom Porcelli, chief US economist at PGIM Fixed Income. “It’s very hard to really practically think of having a recession over the near to medium term.”
The data, which covers the period between July and September, confirms the strength of the world’s largest economy, which has repeatedly defied expectations of a recession despite the Fed holding interest rates high to stamp out inflation.
The US central bank cut rates by a larger than usual half-point last month — its first reduction since 2020 — leaving the benchmark at 4.75 to 5 per cent.
Even as inflation has lingered, however, US consumer spending has remained robust, buoyed by the country’s healthy jobs market. The unemployment rate has risen to 4.1 per cent from its multi-decade low of 3.4 per cent in 2023.
Economists say the uptick in joblessness is a result of more workers entering the labour market because of higher immigration. That has helped ease wage pressures, and in turn inflation, with limited damage to the jobs market — bringing into sight a so-called soft landing for the economy as the Fed begins to cut rates.
Data earlier on Wednesday showed that private sector employers added a net 233,000 roles in October, the biggest increase since July 2023. The non-farm payrolls report on Friday is expected to show jobs growth fell to 113,000 last month in a figure that will probably reflect disruptions caused by severe hurricanes that lashed several states in the country’s south-east.
The US has outperformed its peers among the world’s strongest economies. The IMF recently forecast growth from the US of 2.8 per cent this year and 2.2 per cent next year, versus 3.2 per cent in both years for the global economy as a whole. US consumer confidence has also been strong, and hit a nine-month high in October, according to a report on Tuesday from the Conference Board.
“American consumers are proving yet again that they are world-leading consumers — ‘nobody can touch us’,” said David Kelly, chief global strategist at JPMorgan Asset Management.
The report showed that the proportion of consumers expecting a recession over the next 12 months fell to its lowest level since the question was first asked in July 2022. The percentage who thought the economy was already in a contraction also fell.
Stock market moves were relatively muted on Wednesday, with the S&P 500 swinging between modest gains and losses to close 0.3 per cent lower in New York. The Nasdaq Composite fell 0.6 per cent from its record closing level in the previous session.
In government bond markets, the yield on the policy-sensitive two-year Treasury was up 0.05 percentage points to 4.17 per cent while the yield on the 10-year note gained 0.01 percentage point to trade at at 4.28 per cent. Yields fall as prices rise.
