US economy grows at 3.1% pace in Q3, upgrade from previous estimate

The American economy grew at a healthy 3.1 per cent annual clip from July through September, propelled by vigorous consumer spending and an uptick in exports, the government said in an upgrade to its previous estimate.

Third-quarter growth in US gross domestic product the economy's output of goods and services accelerated from the April-July rate of 3 per cent and continued to look sturdy despite high interest rates, the Commerce Department said Thursday. GDP growth has now topped 2 per cent in eight of the last nine quarters.

Consumer spending, which accounts for about two-thirds of US economic activity, expanded at a 3.7 per cent pace, fastest since the first quarter of 2023 and an uptick from Commerce's previous third-quarter estimate of 3.5 per cent.

Exports climbed 9.6 per cent. Business investment grew a lackluster 0.8 per cent, but investment in equipment expanded 10.8 per cent. Spending and investment by the federal government jumped 8.9 per cent, including a 13.9 per cent surge in defence spending.

American voters were unimpressed by the steady growth under Democratic President Joe Biden. Exasperated by prices that remain 20 per cent higher than they were when an inflationary surge began in early 2021, they chose last month to send Donald Trump back to the White House with Republican majorities in the House and Senate.

Trump will inherit an economy that looks healthy overall. The unemployment rate remains low at 4.2 per cent even though it is up from the 53-year low 3.4 per cent reached in April 2023. Inflation hit a four-decade high 9.1 per cent in mid-2002. Eleven interest rate hikes by the Federal Reserve in 2022 and 2023 helped bring it down to 2.7 per cent last month. That is above the Fed's 2 per cent target. But the central bank still felt comfortable enough with the progress against inflation to cut its benchmark rate Wednesday for the third time this year.

Thursday's report was the Commerce Department's third and final look at third-quarter GDP. It will publish its initial estimate of October-December growth on January 30.