US Economy Grows at Robust 2.8% in Q3, Driven by Consumer Spending and Easing Inflation

The U.S. economy grew at a solid 2.8% annual rate in Q3, driven largely by strong consumer spending despite the Federal Reserve’s high interest rates, according to a report from the Commerce Department. This growth slightly slowed from the 3% rate in Q2 but underscores continued resilience as Americans weigh economic conditions heading into the presidential election.

Consumer spending, which accounts for about 70% of U.S. economic activity, rose at a brisk 3.7% pace, up from 2.8% in the previous quarter. Exports also supported growth, increasing by 8.9%. In contrast, business investment saw a decline, particularly in housing and nonresidential buildings, though spending on equipment surged.

Encouragingly, inflation indicators within the report show moderation, with the Fed’s preferred measure, the Personal Consumption Expenditures (PCE) index, slowing to a 1.5% rate — the lowest in over four years. Core PCE inflation, which excludes food and energy, also fell to 2.2%.

Despite widespread recession predictions due to high borrowing costs, the economy has shown resilience, with steady job growth and cooling inflation. The Fed, which recently cut interest rates by a significant half percentage point, is expected to announce further rate reductions to support continued economic stability.

Consumer confidence remains high, bolstered by the biggest gain in the Conference Board’s consumer confidence index since March 2021. However, the job market has softened, with job openings reaching their lowest point since January 2021, and economists anticipate that October job growth will be modestly impacted by Hurricanes Helene and Milton and a Boeing strike.

As inflation pressures ease, the Fed plans additional rate cuts through 2026, with expectations of reduced borrowing costs for consumers and businesses over time.