U.S. Economy Grows at Steady Clip

Military Spending and Drop in Imports Drive 3.5% Gain in GDP as Global Headwinds Gather.

The economy grew at a solid pace during the third quarter, driven by an uptick in military spending and a drop in imports, showing the U.S. on relatively firm footing as worries mount about a global slowdown.

Gross domestic product, the broadest measure of goods and services produced across the economy, expanded at a 3.5% annual rate from July through September, the Commerce Department said Thursday.

The quarter showed broad-based improvement in the U.S. economy. Business investment grew steadily. Exports showed resilience against a backdrop of slowing global growth. Government outlays, which had dragged on growth for four years, enjoyed a large boost from military spending alongside a brightening budget picture in cities and states.

Still, Thursday’s report underscored an unusual dynamic: Economic growth looks underwhelming compared with other postwar cycles for the U.S., but it may prove to be the envy of other advanced economies.

“I don’t think there’s any question that compared to Europe or Japan we’re looking pretty good here,” said Michael Feroli, chief U.S. economist at J.P. Morgan Chase. “But relative to our own standards and history, we’re still in a disappointing expansion.”

On a year-over-year basis, inflation-adjusted GDP rose 2.3%, a pace that has remained remarkably constant over the past three years despite ups and downs in the quarterly data.

More From The Wall Street Journal (subscription required):