WASHINGTON () – The U.S. economy grew faster than previously estimated in the third quarter, driven by robust consumer spending.

Gross domestic product increased at an upwardly revised 3.1% annualized rate, the Commerce Department’s Bureau of Economic Analysis said in its third estimate of third-quarter GDP on Thursday. The economy was previously reported to have expanded at a 2.8% pace last quarter.

Economists polled by had forecast GDP would be unrevised. The revision reflected upgrades to consumer spending and export growth, which offset a downward revision to private inventory investment and upward revision to imports.

The economy grew at a 3.0% pace in the April-June quarter. It is expanding at a pace that is well above what Federal Reserve officials regard as the non-inflationary growth rate of around 1.8%.

The U.S. central bank on Wednesday delivered a third consecutive rate cut, but projected only two reductions in borrowing costs next year compared to the four it had forecast in September, citing continued economic resilience and still-elevated inflation.

There are also concerns that some of the incoming Trump administration’s policies, including tax cuts, mass deportations of undocumented immigrants and tariffs on imported goods, would be inflationary.

The Fed’s policy rate was reduced by 25 basis points to the 4.25%-4.50% range. It was hiked by 5.25 percentage points between March 2022 and July 2023 to tame inflation.

Fed Chair Jerome Powell told reporters on Wednesday that “it’s pretty clear we’ve avoided a recession,” adding that “the U.S. economy has just been remarkable, I feel very good about where the economy is … and we want to keep that going.”

Consumer spending, which accounts for more than two-thirds of economic activity, grew at a 3.7% pace. That was revised up from the previously estimated 3.5% rate.

A measure of domestic demand that excludes government spending, trade and inventories increased at a 3.4% pace. Final sales to private domestic purchasers were previously estimated to have risen at a 3.2% rate. Domestic demand increased at a 2.7% pace in the second quarter.

National after-tax profits without inventory valuation and capital consumption adjustments decreased $15.0 billion, or 0.4%. They were previously estimated to have risen $0.2 billion, or unchanged in percentage terms.

When measured from the income side, the economy grew at a 2.1% rate last quarter, lowered from the initially estimated 2.2% pace. Gross domestic income (GDI) increased at a 2.0% rate in the second quarter.

In principle, GDP and GDI should be equal, but in practice they differ as they are estimated using different and largely independent source data. Annual benchmark revisions have sharply narrowed the gap between GDP and GDI.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 2.6% rate. That was revised up from the 2.5% rate reported last month. Gross domestic output grew at a 2.5% pace in the April-June quarter.