The U.S. economy expanded at a solid pace in the third quarter, largely powered by a broad-based advance in consumer spending as inflation continued to cool.

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, gross domestic income 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%.

Jobless claims

Separate figures from the Labor Department on 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. The revised GDP data show third-quarter growth was restrained by volatile trade figures, which showed net exports subtracted 0.57 of a percentage point. Inventories also subtracted 0.11 of a 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.

However, 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.