The US economy enjoyed the kind of growth that turns heads between April and June 2023. So the third quarter growth number was quite good, it expanded at an annualized rate of 3.8%. This figure represents a $33-45 billion upward revision from earlier, conservative estimates. It points to a healthy economic picture fueled by healthy consumer spending and a decrease in imports.
The second revision of first quarter growth indicates that the US economy soared over prior expectations for the spring. This confirms a really robust, sustained economic momentum over the first half of the year. American consumers have continued to prove unexpectedly resilient, weathering the storm of tariffs on parts and accessories as well as general economic uncertainty. This resilience is nothing short of incredible, driving a massive surge in consumer spending. By the end of June, year-over-year consumer expenditures were up 2.5%, beating the first consumer spending report’s advance estimate of 1.6%.
It was overall an exciting growth month for retail sales, up 0.6% from last month. Earlier this spring, an unexpected wave of optimism and good news swelled the tide, catching many by surprise. For all the buoyancy that consumer spending and retail sales figures would suggest, employment statistics are telling a more complicated story. After a stroke of luck in adding 297,000 jobs in July, employers added a much smaller than expected 22,000 jobs in August. As a result, the unemployment rate ticked up a bit from 4.2% to 4.3%.
In the first quarter of this year, the economy shrunk by 0.6%. That’s in part because businesses scrambled to import goods before the tariffs first instituted by then-US President Donald Trump went into effect. Bill Adams, an economist, remarked on the recent data’s contrasting narratives:
“The latest economic data are considerably more upbeat than the droopy August jobs report.” – Bill Adams
Adams said the new GDP and jobless claims data should help assuage fears.
Lydia Boussour highlighted potential challenges ahead:
“With the impact of tariffs and policy uncertainty becoming increasingly visible, slower US growth and higher inflation are still on the horizon.” – Lydia Boussour
In fact, initial claims for unemployment insurance just recently touched their lowest level since July. All of this points toward a labor market still exhibiting notable resilience, despite the alarming recent jump in the unemployment rate.
On balance, that second quarter growth is just a start, but it does represent the quickest clip the economy has hit in almost two years. Finally, consumer spending is propping up economic activity. Analysts continue to watch how the impact of the ongoing tariff war and other policy decisions shift the state’s economic outlook long-term.