The US economy grew at a surprisingly strong 4.3 per cent annualised rate in the third quarter, the fastest expansion in two years, as government and consumer spending, as well as exports, all increased.
US gross domestic product from July through September – the economy’s total output of goods and services – rose from its 3.8 per cent growth rate in the April-June quarter, the Commerce Department said on Tuesday in a report delayed by the government shutdown. Analysts surveyed by the data company FactSet forecast growth of 3 per cent in the period.
However, inflation remains higher than the Federal Reserve would like. The Fed’s favoured inflation gauge – called the personal consumption expenditures index, or PCE – climbed to a 2.8 per cent annual pace last quarter, up from 2.1 per cent in the second quarter.
Economists say that persistent and potentially worsening inflation could make a January interest rate cut from the Fed less probable, even as central bank officials remain concerned about signs of a slowing labour market.
Consumer spending, which accounts for about 70 per cent of US economic activity, rose to a 3.5 per cent annual pace last quarter, up from 2.5 per cent in the April-June period.
Yet despite the strong economic data, overall US consumer confidence fell for a fifth consecutive month, reflecting more pessimistic views of the labour market and business conditions.
A gauge of present conditions dropped to 116.8, the lowest since February 2021, while a measure of expectations for the next six months held steady this month.
Economists were expecting confidence to rebound somewhat after the end of the government shutdown, but the continued decline underscores how worried consumers are about inflation, tariffs and politics, according to the report.
Last week, the government reported that the US economy gained 64,000 jobs last month but lost 105,000 jobs in October. Notably, the unemployment rate rose to 4.6 per cent last month, the highest since 2021.
Since March, job creation has slowed to an average 35,000 jobs a month, compared to 71,000 in the year ended in March. Fed chairman Jerome Powell has said that he expects those figures could be revised lower.
