The United States economy grew at a blistering annualized rate of 4.3% in the third quarter, far exceeding the already high expectations of analysts. The strong growth for the three months to September demonstrates that this recovery is well and truly underway. Most importantly, it highlights resilience in the face of increasing economic uncertainty.
Economists from all quarters were expecting a much lower growth rate of around 3.2%. That has some economists believing that strength will carry over into the economic data of the next few months.
Consumer spending, the beating heart of the American economy, increased at a 3.5% annual rate over that period. Households made unprecedented jumps to pay out-of-pocket for core health care services, a major driver of this trend upward.
The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, increased, climbing to 2.8% over the last three-month spell. This figure has risen sharply from the previous quarter’s index of 2.1%. Inflationary pressures appear to still be influencing consumers.
Not only did consumer spending get a strong jolt, but exports saw a huge boost with exports up 7.4% in the third quarter. Imports continued losing ground at an accelerating pace. This drop is largely due to President Donald Trump’s tariffs on shipments coming into the United States that went into effect earlier this year.
The recent federal government shutdown pushed back the release of this important economic report. It hampered their ability to collect and analyze data, leading to the holdup.
All of these factors have contributed to creating an unprecedented economic climate. These coalescing perfect storms include abrupt shifts to trade and immigration policies, ongoing high inflation, and halting of federal government spending. These shifting dynamics have produced a unique set of challenges and opportunities for the U.S. economy.
Consumer confidence will be crucial in keeping this growth path sustainable, warned Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. At the same time, Aditya Bhave, senior economist at Bank of America, told clients that the economy had been more resilient than expected.
“This is an economy that has defied doom and gloom expectations basically since the beginning of 2022.” – Aditya Bhave
Bhave added further optimism regarding future growth prospects.
“I don’t see why that wouldn’t continue going forward.” – Aditya Bhave