Michelle ThompsonThe U.S. economy has reportedly achieved a significant and rare milestone, yet most voters remain dissatisfied just days before the presidential election.
The Commerce Department announced Wednesday that gross domestic product (GDP), which tracks the value of goods and services produced, grew at an annual rate of 2.8% in the third quarter. This growth rate, while slightly below the previous quarter’s 3%, surpassed the 2.6% anticipated by economists in a FactSet poll. GDP figures are adjusted for both inflation and seasonal variations.
Wednesday’s release follows earlier data showing robust economic indicators: the economy gained 254,000 jobs in September, inflation is nearing the Federal Reserve’s 2% target, and consumer confidence saw its fastest increase since March 2021, according to The Conference Board. James Bullard, former president of the Federal Reserve Bank of St. Louis, told CNN this month, “I think we should declare a soft landing now,” signaling that the U.S. may have curbed inflation without sparking a recession—an exceptional outcome according to economists.
Nevertheless, consumer sentiment remains lower than pre-pandemic levels. One explanation is that prices remain significantly above 2019 levels, even though the Fed’s intense efforts since 2022 have eased inflation’s pace. A Brookings Institution study, released last week, suggests this disparity in sentiment may be due to increased partisanship, media emphasis on negative news, and a correlation between age and lower sentiment that impacts overall economic perceptions.
Consumer Spending Remains Strong.
Despite other economic factors, American consumers continued to drive third-quarter growth, as reported in Wednesday’s GDP release. Consumer spending, which makes up about 70% of the economy, was the main growth contributor, surging due to high spending on large items, while service-related spending saw a slight decrease.
From July to September, businesses maintained their investments, albeit with a slower pace than earlier in the year, while federal and state government spending also supported third-quarter growth.
The Federal Reserve cut interest rates by half a point in September for the first time in over four years, signaling that officials believed inflation was sufficiently managed to allow a focus shift toward employment. The Fed’s dual mandate is to control inflation and support maximum employment through its interest rate policies.
The U.S. Economy is Growing at a Faster Rate Than Other Advanced Economies.
President Joe Biden highlighted recent U.S. economic progress on Wednesday, noting that the latest GDP report reflects significant improvement since he took office, moving from a severe economic downturn to a leading global position.
A White House official added that the Biden-Harris administration has seen the highest average annual economic growth rate of any U.S. administration in this century.
The International Monetary Fund (IMF) projects U.S. GDP growth to reach 2.5% in the fourth quarter, surpassing its earlier July forecast, which would mark the strongest growth among the Group of Seven (G7) leading economies.
