The US economy expanded at a solid pace in the third quarter, largely powered by a broad-based advance in consumer spending and steady business investment. Gross domestic product increased at a 2.8% annualized pace in the third quarter, the second estimate of the figures from the Bureau of Economic Analysis showed Wednesday. The economy’s primary growth engine — consumer spending — advanced 3.5%, the most this year.

While still strong, household spending was revised modestly lower from the initial reading, reflecting slightly less robust outlays for merchandise. At the same time, business investment in research and development was revised higher.

The GDP report showcases the durability of an economic expansion that’s been tested by lingering price pressures, high borrowing costs and political uncertainty. While progress on inflation has leveled out more recently, the Federal Reserve has started reducing interest rates.

With Donald Trump sealing his return to the White House, American businesses and consumers now await the roll-out next year of his economic agenda.

The government’s other main gauge of economic activity — gross domestic income — rose 2.2%, after a revised 2% annualized pace in the second quarter. Whereas GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing those same goods and services. The average of the two growth measures in the third quarter was 2.5%.

The GDI data include figures on corporate profits. After-tax profits were little changed. Profits as a share of gross value added for non-financial corporations, a measure of aggregate profit margins, edged up to 15.6% last quarter from 15.5% in the prior three-month period.

Trump’s win has added fuel to a recent rally in stock prices, in part because many traders believe his economic agenda will keep boosting corporate profits. The president-elect has vowed to slash corporate taxes as well as hit Chinese shipments with punitive tariffs, on top of tasking Wall Street executives with leading the departments of Treasury and Commerce.

On the flip side, some economists are concerned that Trump’s fiscal plans will put upward pressure on inflation.

Tamer Inflation

The GDP report showed the Fed’s preferred metric — the personal consumption expenditures price index — rose at an unrevised 1.5% annualized rate in the third quarter. Excluding food and energy, the core PCE gauge climbed 2.1%, versus 2.2% in the previous estimate.

Economists are looking ahead to the release of monthly PCE data, due later this morning. It’s currently projected to show the metric, excluding food and energy, rose 2.8% in October from a year ago. The monthly report is also expected to show resilient household demand at the start of the fourth quarter.

Some Fed officials have indicated they’re in no rush to cut interest rates so long the labor market remains resilient and the economy continues to power ahead. While job growth has been softening somewhat, other indicators point to a resilient economy and declining odds of a recession.

Jobless Claims

Separate figures from the Labor Department Wednesday showed initial jobless claims were little changed at a historically low level. However, continuing applications, a proxy for the number of people receiving benefits, rose to the highest since 2021. That suggests those who are unemployed are having trouble finding another job.

Stock-index futures were little changed and Treasury yields remained lower after the data, with investors awaiting October inflation figures later this morning.

The revised GDP data show third-quarter growth was restrained by volatile trade figures, which showed net exports subtracted 0.57 percentage point. Inventories also subtracted 0.11 percentage point.

Other government data out Wednesday showed the merchandise trade deficit narrowed in October to $99.1 billion from a more than two-year high. Economists see businesses stocking up on imports in anticipation of new tariffs next year.

According to the GDP report, a measure of underlying growth trends favored by economists that combines consumer spending and business investment, known as final sales to private domestic purchasers, advanced 3.2%, the most this year.

Government spending rose an annualized 5%, helped by a nearly 14% annualized advance in national defense outlays.

Nonresidential fixed investment rose an annualized 3.8%, the slowest this year and dragged down by spending on structures. However, business spending on equipment climbed at a solid 10.6% rate — the most in over a year. That included an 39% annualized increase in outlays on computers and peripheral equipment, the largest advance since 2020.

October shipments of non-defense core capital goods, which exclude aircraft and are a proxy for business investment in equipment, increased 0.2%, separate data out Wednesday showed. That was the first gain since April. Orders for all durable goods rose at a similar pace.

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