FILE – The sun sets behind power lines on Sept. 23, 2024, in the Porter Ranch section of Los Angeles. (AP Photo/Mark J. Terrill, File)

WASHINGTON (AP) — The U.S. economy grew at a healthy 2.8 percent annual rate from July to September, with consumers helping to drive growth despite the weight of still-high interest rates.

Wednesday’s Commerce Department report said gross domestic product — the economy’s total output of goods and services — fell slightly from the 3 percent growth rate in the April-June quarter. But the latest numbers still reflect surprising durability as Americans assess the state of the economy in the final stretch of the presidential race.

Consumer spending, which accounts for about 70 percent of U.S. economic activity, accelerated to an annual pace of 3.7 percent in the latest quarter, up from 2.8 percent in the April-June period. Exports also contributed to third-quarter growth, rising at a rate of 8.9%.

On the other hand, growth in business investment slowed sharply due to a decline in investment in housing and non-residential buildings such as offices and warehouses. But spending on equipment has increased.

Wednesday’s report also contained some encouraging news on inflation. The Federal Reserve’s favored gauge of inflation — called the personal consumption expenditures index, or PCE — rose just 1.5 percent annually in the latest quarter, down from 2.5 percent in the second quarter and the lowest figure since for four years. Excluding volatile food and energy prices, so-called core PCE inflation was 2.2 percent, down from 2.8 percent in the April-June quarter.

The report is the first of three estimates the government will make on GDP growth for the third quarter of the year. The US economy continued to expand ahead of much higher interest rates imposed by the Fed in 2022 and 2023 in its efforts to curb inflation that has risen as the United States bounced back with unexpected strength from the brief but devastating recession of COVID-19. of 2020. Despite widespread predictions that the economy would succumb to a recession, it continued to grow, with employers still hiring and consumers still spending. And with inflation steadily cooling, the Fed began cutting interest rates.

The report “sends a clear message that the economy is doing well and inflation is moderating — good news for the Federal Reserve,” said Ryan Sweet, chief economist at Oxford Economics.

Within the GDP data, a category that measures the underlying strength of the economy grew at a solid annual rate of 3.2 percent from July to September, up from 2.7 percent in the April-June quarter. This category includes consumer spending and private investment, but excludes volatile items such as exports, inventories and government spending.

“Today’s GDP report shows how far we’ve come since taking office — from the worst economic crisis since the Great Depression to the strongest economy in the world,” said President Joe Biden.

Other recent economic reports also pointed to a still healthy economy. In a sign that the nation’s households, whose purchases drive most of the economy, will continue to spend, the Conference Board said Tuesday that its consumer confidence index posted its biggest monthly gain since March 2021. The proportion of consumers who expect to a recession in the next period. 12 months down to the lowest point since the council first asked that question in July 2022.

At the same time, the nation’s once-sizzling job market has lost steam. On Tuesday, the government reported that the number of U.S. job openings fell in September to the lowest level since January 2021. And employers have added an average of 200,000 jobs per month so far this year — a healthy number, but down from a record 604,000 in 2021 as the economy rebounded from the pandemic recession, 377,000 in 2022 and 251,000 in 2023.

On Friday, the Labor Department is expected to report that the economy added 120,000 jobs in October. That gain, however, is likely to be significantly reduced by the effects of hurricanes Helene and Milton and a strike at aviation giant Boeing, all of which will temporarily take thousands of people off the payroll.

Despite continued progress in inflation, average prices are still well above pre-pandemic levels, which has exasperated many Americans and posed a challenge to the prospects of Vice President Kamala Harris in her race against former President Donald Trump. Most mainstream economists suggested, however, that Trump’s policy proposals, unlike Harris’s, would make inflation worse.

At its most recent meeting last month, the Fed was pleased enough with progress on inflation — and worried enough about a slowing labor market — to cut its benchmark rate by half a percentage point, the first and most big rate reduction in more than four. years. When it meets next week, the Fed is expected to announce another rate cut, this one a more typical quarter point.

Central bank policymakers have also signaled they expect to cut their key interest rate again at their final two meetings this year, in November and December. And they forecast four more rate cuts in 2025 and two in 2026. The cumulative result of the Fed’s rate cuts over time is likely to be lower borrowing rates for consumers and businesses.