GDP Report Shows US Economy Grew at 2.8% Rate

In a key economic report released just days before the presidential election, gross economic product rose at a 2.8 percent rate in the third quarter.

Consumers are spending. Inflation is cooling. And the U.S. economy looks as strong as ever.

Gross domestic product, adjusted for inflation, expanded at a 2.8 percent annual rate in the third quarter, the Commerce Department said on Wednesday. That came close to the 3 percent growth rate in the second quarter and was the latest indication that the surprisingly resilient recovery from the pandemic recession remained on solid footing.

“The economy right now is firing on nearly all cylinders,” said Joe Brusuelas, chief economist at the accounting and consulting firm RSM.

The report was the first of three crucial indicators on the nation’s economy scheduled for release this week, just days before the presidential election and the next policymaking meeting of the Federal Reserve.

The strength in the third quarter was again driven by robust consumer spending, which grew at a 3.7 percent rate, adjusted for inflation. Rising wages and low unemployment meant that Americans continued to earn more, while inflation continued to ease: Consumer prices rose at a 1.5 percent annual rate in the third quarter and were up 2.3 percent from a year earlier.

As recently as a few weeks ago, many economists were concerned that spending was about to slow as the job market weakened and household savings dwindled. But revised data released last month showed that incomes and savings were stronger than initially reported, and recent data on the job market has been strong. That suggests that spending could continue to grow — especially because data released by the Conference Board this week showed that consumers were at last feeling more confident in the economy.

“Most consumers continue to be working,” said Dana Peterson, chief economist for the Conference Board. “If you’re a consumer and you’re working, then you’re going to spend.”

Other parts of the economy were more mixed. Businesses stepped up their investments in both equipment and intellectual property, which some economists said could reflect demand for chips and software associated with artificial intelligence. Government spending was also strong, with spending on defense contributing more than half a percentage point to overall G.D.P. growth.

But businesses pulled back spending on new buildings, and the housing market contracted for the second straight quarter — signs that high interest rates continue to take a toll. The weakness in housing could continue: Mortgage rates, which fell steadily over the summer, have been rising again in recent weeks.

“It’s not like we’re going back to 3 percent mortgage rates anytime soon,” said Jay Bryson, chief economist for Wells Fargo. “Single-family housing is going to stay out of reach for many Americans.”

The third-quarter data is preliminary and will be revised at least twice. Economists will get a more up-to-date read on the economy on Thursday, when the Commerce Department releases data on spending and inflation in September, and on Friday, when the Labor Department releases data on employment and wages in October.

Growth in the third quarter may have been lifted partly by businesses accelerating investments ahead of an expected strike at ports on the East and Gulf Coasts. The strike wound up lasting less than three days, but many businesses prepared for a longer shutdown, which may have, in effect, pulled forward some economic activity from the fourth quarter into the third.

Partly as a result, most forecasters expect growth to slow in the fourth quarter. And few would offer a confident prediction about next year — in part because the economy’s path will depend to some extent on who wins next week’s elections and what policies the next president is able to impose.

Still, the economy has been tested repeatedly in recent years — first by the pandemic and the disruptions it caused, then by the inflation and high interest rates that followed. So far, it has defied every prediction of a recession.

“It wasn’t so long ago when commentators were certain we would need a recession to beat the inflation caused by the pandemic,” Lael Brainard, director of the White House’s National Economic Council, said in a call with reporters after the G.D.P. figures were released. “But it’s now clear we’ve been able to bring inflation down to rates from before the pandemic while growing faster than projected.”

And while the economy faces headwinds in the coming months, it also has some important factors working in its favor. Inflation continues to cool, allowing the Federal Reserve to begin cutting interest rates. Government investments in infrastructure and green energy, and private-sector investments in artificial intelligence, are flowing to businesses and ultimately to workers.

“The underlying state of the economy is pretty strong right now,” Mr. Bryson said.