US economy rises 2.8% in 3Q, driven by spending ahead of election
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The news: The US economy grew 2.8% in the third quarter, driven by strong consumer demand and bolstered by business investment and government spending, particularly in defence, according to a preliminary estimate by the Bureau of Economic Analysis.
The context: The data comes just days before a contested US presidential election on 5 November, with the economy top of mind for most Americans, many of whom are unhappy about high food and housing prices.
Overall, the GDP growth rate for the three months ending September is lower than the 3% growth rate the average economist was expecting.
However, it shows the world's largest economy is achieving a so-called soft landing despite high interest rates, with falling inflation alongside continuing resilient economic growth.
The numbers: Consumer spending increased 3.7%, the fastest pace since early 2023. While inflation as measured by the personal consumption expenditures price index, eased to 1.5% in the third quarter, down from 2.5% in the second quarter, the report showed.
Federal investments in infrastructure and private-sector tech advances, especially in AI, supported the momentum. Business equipment spending surged 11.1%, though high borrowing costs weakened the housing market, which contracted for the second quarter.
Defence spending added over half a percentage point to GDP growth, as government spending on national defence during the quarter surged at the fastest pace in more than two decades.
What they said: "What's not to like?" Chris Low, chief economist at FHN Financial was quoted by Reuters as saying. "Solid GDP growth fuelled by strong consumption and strong capital equipment spending, all accompanied by inflation sliding back toward 2%."
Joe Brusuelas, chief economist at the accounting and consulting firm RSM said: “The economy right now is firing on nearly all cylinders.”
The sources: Bureau of Economic Analysis , The Wall Street Journal , Reuters , The New York Times
