US GDP growth slows to 2.8% in Q3, but economy remains strong ahead of election

The US economy grew at an annualised rate of 2.8% in the third quarter, according to preliminary data released by the Bureau of Economic Analysis (BEA), registering a solid pace of growth as ebbing inflation and strong wage gains powered consumer spending.

The third-quarter growth, driven by gains in consumer spending, exports, and federal government expenditure, was tempered by a downturn in private inventory investment and reduced residential investment. Consumer spending, the largest contributor, saw gains across goods and services, led by increased purchases of motor vehicles, prescription drugs, healthcare services, and dining out.

The economy grew at a 3% pace in the second quarter.

Current-dollar GDP climbed by 4.7%, or $333.2 billion, reaching $29.35 trillion. Inflation showed signs of cooling, with the price index for gross domestic purchases rising 1.8%, down from 2.4% in the second quarter.

The Personal Consumption Expenditures (PCE) price index—closely watched by the Federal Reserve—slowed to a 1.5% increase.

"Today, the US economy is strong," Yellen said in her remarks to a banking conference, acknowledging that challenges remain. “The typical American can afford more than before the pandemic, and new businesses are being created at a record pace,” she added, positioning the economy as a resilient backdrop to an election shaped by economic anxiety.

However, a recent Reuters/Ipsos poll showed that 61% of voters in key battleground states believe the economy is on the wrong track. Cost-of-living concerns continue to resonate with voters, many of whom are leaning towards former President Donald Trump, who consistently outperforms Biden on economic issues in polls.