Editor’s Note
This article has been updated to reflect revised data showing the U.S. economy grew at an annualized rate of 4.4% in the third quarter, its fastest pace in two years, driven by stronger exports and a smaller inventory drag.
The US economy expanded in the third quarter slightly more than initially reported, thanks to higher exports and a smaller drag from inventories.
Gross domestic product, which measures the value of goods and services produced in the US, adjusted for inflation, increased at a revised annualized rate of 4.4%, the highest in two years, according to data from the Bureau of Economic Analysis released on Thursday.
The report showed one of two consecutive quarters of the strongest growth since 2021, when the economy was still recovering from the pandemic. Companies slowed the pace of goods imports after an acceleration earlier in the year to avoid the broad tariffs of President Donald Trump. Consumer and business spending has also remained strong despite erratic trade policies.
Against a backdrop of robust growth, along with a more stable labor market and inflation that remains above the Federal Reserve’s target, monetary authorities are expected to keep interest rates unchanged at next week’s meeting.
In another report released Thursday, initial claims for US unemployment benefits remained low.
The GDP report showed that the inflation gauge preferred by the central bank — the personal consumption expenditures price index, excluding food and energy — rose at an unrevised rate of 2.9% in the third quarter. The Bureau of Economic Analysis will release October and November price data later this morning, along with personal income and spending figures.
Consumer spending — the main engine of economic growth — rose at an annualized rate of 3.5% last quarter. This reflected the strongest growth in services spending in three years, while goods spending also accelerated compared to the previous quarter.
Business investment expanded at a rate of 3.2%, driven by higher spending on computer equipment. Investment in data centers, which house the infrastructure for artificial intelligence, climbed to a new record.
Given that swings in trade and inventories have distorted overall GDP over the past year, economists are paying closer attention to final sales to domestic private purchasers, a narrower metric of consumer demand and business investment. This indicator grew at a rate of 2.9%, the same as in the previous quarter.