The US economy grew at a slightly slower pace last quarter, although consumer spending remains strong.
The country's gross domestic product (GDP) grew by 2.8 per cent in the months from July through September, adjusted for inflation and seasonality, the US Commerce Department reported on Wednesday. A Dow Jones survey of economists projected the US GDP to grow by 3.1 per cent.
Despite a slight slowdown compared to the second quarter's 3 per cent growth, Wednesday's report showed the US economy remains strong despite higher interest rates. Personal consumption expenditures, a tool to measure consumer activity, grew by 3.7 per cent in the third quarter. Exports and government spending also contributed to last quarter's economic activity.
The report also showed a continued decline in inflation. The Personal Consumption Expenditures (PCE) price index increased 1.5 per cent in the third quarter, down from 2.5 per cent in the second quarter. Core PCE, which excludes food and energy, increased 2.2 per cent over the three-month period.
“Though GDP is backward-looking, it sends a clear message that the economy is doing well, and inflation is moderating, good news for the Federal Reserve,” Oxford Economics chief US economist Ryan Sweet said in a note.
With the battle for inflation considered to be won, the Federal Reserve has largely shifted its focus to the health of the economy and the labour market.
A report released on Tuesday showed that the labour market is returning to its pre-pandemic levels. The Bureau of Labour Statistics reported job openings fell to 7.4 million on the last day in September, down from August's revised number of 7.8 million.
"The past month's drop in job openings brings the vacancy rate to its lowest level since 2020 in another sign labour conditions have normalised after the post-pandemic hiring frenzy," Wells Fargo economists wrote in a note to clients.
The jobs report for October, due to be released on Friday, will be the last major piece of economic data before the Federal Open Market Committee meets on November 6 and 7. The impact of recent hurricanes and a large strike among Boeing workers are anticipated to weigh on the report.
The latest data comes as the Fed begins its monetary policy easing cycle, after holding interest rates steady between 5.25 and 5.5 for more than a year. The Fed, which is trying to engineer a soft landing by slowing the economy without steering it into an unexpected downturn, cut interest rates by 50 basis points last month.
Markets anticipate the US central bank will cut rates by a further 25 basis points when they meet next week to bring its target range to 4.50 to 4.75 per cent, CME Group's FedWatch tool shows.
The report comes not just at a pivotal time for the Fed's decisions, but also in US politics where voters will take to the polls in less than a week to determine the country's new president.
Supporters of both Kamala Harris and Donald Trump ranked the cost of living and the economy as their top issues this election, although Mr Trump's supporters ranked the issues by a wider margin, according to a Deltapoll/The National survey released on Monday.
Ms Harris scored better on the economy in the poll, with 51 per cent favouring her to handle the economy compared to 45 per cent for Mr Trump.
The Democratic Vice President holds a narrow lead nationally, but Mr Trump holds a slight edge in a handful of swing states whose electoral college votes are likely to determine the next president.