Economists polled by Reuters expected a 3% advance, with estimates ranging between 2% and 3.5%, after improving 3% in the second quarter. The pace of growth was well above what Federal Reserve authorities consider the non-inflationary growth rate, around 1.8%.
The advance GDP estimate was released less than a week before Americans go to the polls on Nov. 5 to choose between Democratic Vice President Kamala Harris and Republican former President Donald Trump.
Polls show a close race. Consistently calling the economy a top electoral issue, citizens have complained about the high cost of food and housing even as the economy has defied recession forecasts and continues to outperform its global counterparts. .
Polls of voters have consistently given Trump the lead when asked who would be a better manager of the economy, including the latest Reuters/Ipsos poll released on Tuesday.
The report added to annual reviews released last month, which indicated the economy is much stronger than previously estimated. The revisions almost erased the difference between GDP and Gross Domestic Income (GDI), an alternative measure of growth, until the second quarter.
Before the review, some economists had argued that the gap suggested economic activity was being overestimated. The economy has continued to resist despite increases of 5.25 percentage points in interest rates between 2022 and 2023 by the Fed to control inflation.
The price index for personal consumption expenditures, excluding the volatile food and energy components – closely watched by the Fed – rose at a 2.2% pace in the third quarter, slowing sharply from the 2.8% pace in the second quarter.
As inflation approaches the Fed’s 2% target, the central bank is easing monetary policy, and last month kicked off that cycle with an unusually large rate cut of half a percentage point.
That cut in credit costs, the first since 2020, lowered the Fed’s official rate to the 4.75%-5% range.
