GDP Report: America's economy is at a historic point ahead of the presidential election

Washington
CNN
—

The US economy appears to have achieved a remarkable and historic achievement.

Gross domestic product, which measures all goods and services produced in the economy, grew at an annual rate of 2.8% in the third quarter, the Commerce Department said Wednesday. That's a slightly weaker pace than the 3% rate in the second quarter and more than the 2.6% rate forecast by economists in a FactSet poll. GDP is adjusted for seasonal fluctuations and inflation.

While the U.S. economy continued to expand from July to September, inflation fell toward the Federal Reserve's 2 percent target over the same period, the report shows. Several economists tell CNN that the economy has finally achieved an exceptionally rare achievement known as a “soft landing,” a scenario in which inflation is tamed without a recession.

“I think we should call for a soft landing now,” James Bullard, former president of the Federal Reserve Bank of St. Louis, said in an interview with CNN earlier this month.

American shoppers' spending continued to fuel economic growth in the third quarter, according to the report. This was by far the largest contributor to GDP growth in the third quarter. Consumer spending accounts for around 70% of economic output. Spending rose sharply in the third quarter, driven by purchases of high-priced items, while spending on services fell slightly.

Meanwhile, companies continued to invest in the July to September period, albeit at a slightly slower pace than at the beginning of the year. Federal and state government spending also contributed to economic growth in the third quarter.

In September, the Fed cut interest rates by a significant half percentage point for the first time in more than four years. That was a sign that Fed officials were confident enough that inflation had come under control just enough that they could begin cutting interest rates to focus more attention on the labor market. The Fed is mandated by Congress to stabilize prices and maximize employment through its interest rate policy.

This story is evolving and will be updated.