The U.S. economy expanded at a slower-than-anticipated rate of 2.8% in the third quarter.

Despite expectations of a slowdown, the U.S. economy experienced another solid period of growth in the third quarter, driven by strong consumer spending.

The Commerce Department reported that Gross Domestic Product, which measures all goods and services produced in a three-month period from July to September, increased at a 2.8% annualized rate, after adjusting for inflation and seasonality.

In the second quarter, the economy accelerated at a 3% pace, which was slightly below the 3.1% increase that economists surveyed by Dow Jones had been expecting.

Despite elevated interest rates and long-standing worries about the sustainability of growth, the U.S. economy has continued to expand, as confirmed by the report.

The economy has been kept moving due to resilient consumer spending, which accounts for about two-thirds of all activity, and a relentless wave of government spending that pushed the budget deficit to more than $1.8 trillion in fiscal 2024.

The department reported that personal consumption expenditures, a measure of consumer activity, rose 3.7% in the quarter, marking the strongest growth since Q1 of 2023. Federal government spending was another significant factor contributing to this growth, with a 9.7% increase, driven by a 14.9% surge in defense spending.

The 11.2% increase in imports, which reduced GDP growth, counterbalanced the 8.9% increase in exports.

The data had little impact on markets, as stock market futures indicated a mixed opening and treasury yields were also mixed.

Despite a seemingly strong economy and inflation that remains above target, the Federal Reserve is considering lowering interest rates further.

It is predicted by markets that the Fed will reduce its benchmark short-term borrowing rate by another quarter of a percentage point during its meeting on Nov. 7.

Although the personal consumption expenditures price index, the Fed's preferred inflation gauge, rose 1.5% for the quarter, below the central bank's 2% target, the increase in core PCE, excluding food and energy, was still up 2.2%.

In the third quarter, the personal savings rate decreased from 5.2% to 4.8%, despite consumers continuing to use savings and credit to fund their purchases.

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