Third-quarter GDP shows U.S. economy grew a robust 3.5%

Last Updated Oct 26, 2018 9:55 AM EDT

The U.S. economy grew at a robust 3.5 percent between July and September, the Commerce Department reported Friday. Although that is slower than the breakneck pace of expansion earlier this year, it shows the economy remains on solid footing.

Gross domestic product -- the total value of goods and services -- jumped 4.2 percent in the April-to-June period. The two quarters marked the strongest consecutive quarters of growth since 2014.

This year's third-quarter figure was fueled by strong consumer spending, but newly enacted trade tariffs between the U.S. and China acted as a drag on the figures. Declining U.S. exports and a drop in business investment are partly responsible for growth cooling between the second and third quarters, the Commerce Department noted.

"[T]he trade deficit expanded rapidly and subtracted 1.8 percentage points from growth this quarter. If the Trump administration is trying to boost American competitiveness with its policy actions, it is clearly failing," wrote Josh Bivens, research director at the left-leaning Economic Policy Institute.

The overall figure was slightly higher than many economists had been projecting, and puts the U.S. on track to hit an average of 3 percent GDP growth for the year—a psychologically important figure that President Donald Trump has promised as a result of his economic policies.

But some economists worry that the delayed effects of tariffs and higher interest rates will choke off growth starting next year.

"Next year, as the boost from fiscal stimulus is fading and the lagged impact of higher interest rates begins to weigh more heavily, we expect GDP growth to slow below its 2% potential pace," Michael Pearce, senior U.S. economist at Capital Economics, said in a note. "That is why we expect the Fed to stop raising rates by the middle of next year, sooner than markets or Fed officials themselves anticipate."

-- The Associated Press contributed to this report.