The U.S. economy reportedly delivered a stronger-than-expected performance in the third quarter, expanding at a robust 4.3 percent annual rate as American consumers kept spending, exports climbed, and government outlays increased, according to new data released Tuesday.
Gross domestic product, the broadest measure of economic activity, accelerated sharply from the 3.8 percent growth rate recorded in the second quarter, the Commerce Department reported. The July-through-September surge significantly outpaced expectations, as economists surveyed by FactSet had projected growth of just 3 percent.
The numbers point to an economy that continues to show resilience and momentum, driven in large part by the American consumer. Consumer spending, which accounts for roughly 70 percent of overall economic activity, grew at a 3.5 percent annual pace in the third quarter. That marked a notable jump from the 2.5 percent pace seen in the April-to-June period, signaling that households remained willing to open their wallets even as prices remain elevated.
Exports also contributed to the strong showing, along with increased government spending, adding to the overall lift in economic output. Together, those factors helped propel growth well beyond forecasts, underscoring the economy’s underlying strength during the summer months.
Still, the report also highlighted a lingering challenge: inflation remains higher than the Federal Reserve would like. While growth has accelerated, price pressures have also picked up, complicating the central bank’s efforts to bring inflation back to its preferred range.
The Federal Reserve’s favored inflation gauge, the personal consumption expenditures index, rose at a 2.8 percent annual rate in the third quarter. That represented a sharp increase from the 2.1 percent pace recorded in the second quarter, moving inflation further above the Fed’s 2 percent target.
Even more telling, so-called core PCE inflation, which strips out volatile food and energy prices, climbed to 2.9 percent. That was up from 2.6 percent in the April-June quarter, suggesting that underlying inflationary pressures are proving stubborn.
The combination of strong growth and elevated inflation presents a mixed picture for policymakers. On one hand, the economy’s performance exceeded expectations and showed broad-based strength across key sectors. On the other, rising inflation complicates the outlook and could influence future decisions by the Federal Reserve.
For American families and businesses, the numbers reflect an economy that continues to expand at a healthy pace, fueled by steady consumer demand. fThe stronger growth rate suggests that fears of an imminent slowdown were overstated, at least during the third quarter.
At the same time, higher inflation readings reinforce concerns that the fight against rising prices is not yet over. As consumers spend more and economic activity accelerates, price pressures remain a central issue shaping the economic debate.
The third-quarter data paints a picture of an economy firing on multiple cylinders, even as inflation remains a thorny problem. With growth beating forecasts and consumer spending strengthening, the latest report offers evidence of economic momentum — paired with a reminder that inflation is still very much part of the story.
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