Economy ticked up to 2.9% in Q3, GDP shows

WASHINGTON — Despite high interest rates and chronic inflation, the U.S. economy grew at a 2.9% annual rate from July through September, the government said Wednesday in a healthy upgrade from its initial estimate.

Last quarter’s rise in the gross domestic product — the economy’s total output of goods and services — followed two consecutive quarters of contraction. That decline in output had raised fears that the economy might have slipped into a recession in the first half of the year despite a still-robust job market and steady consumer spending.

But since then, most signs have pointed to a resilient economy, led by steady hiring, plentiful job openings and low unemployment. Wednesday’s government report showed that the restoration of growth in the July-September period was led by solid gains in exports and consumer spending that was stronger than originally reported.

“Despite higher borrowing costs and prices, household spending — the driver of the economy — appears to be holding, which is a positive development for the near-term outlook,’’ said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

It marked the second of three estimates the Commerce Department will provide of economic expansion in the third quarter. In its initial estimate, the department had estimated the economy grew at a 2.6% annual rate.

Economists expect the economy to eke out modest 1% annualized growth from October through December, according to a survey of forecasters conducted by the Federal Reserve Bank of Philadelphia.

Economists had shrugged off the contraction in GDP in the first half of the year because it didn’t reflect any major fundamental weakness in the economy.