The United States economy expanded at an annual rate of 4.3% during the third quarter of 2023, significantly surpassing expectations. Analysts were expecting just 3.2% growth, making this period the most robust growth in two years. This jump in economic activity can be mostly credited to strong consumer spending and a spike in exports, as well as some helpful monetary policy shifts.
Consumer spending increased at an annualized rate of 3.5% over the three-month period ending in September. This increase is further evidence of the ongoing strength of American households, even amid fears of high and rising prices and inflation. Exports skyrocketed by 7.4% over that same time frame. This phenomenal expansion was the key driver in lifting the economic performance to stratospheric levels.
The personal consumption expenditures price index, a key inflation measure closely watched by the Federal Reserve, climbed 2.8%. This increase was just during the three-month period ending in September. Inflation is still clearly a worry, but Michael Pearce, chief US economist at Oxford Economics, was hopeful about the course that the economy seems to be taking. He stated that “underlying measures are consistent with a solid expansion.”
Despite the positive growth figures, challenges remain. Both recent household surveys and credit card data indicate that households are starting to hit the brakes on their spending. Oliver Allen, senior US economist at Pantheon Macroeconomics, flagged this trend among worries about the state of household finances. Future economic momentum may be doubtful due to the impact of rising prices on sustained growth.
The U.S. economy is reeling from severe shocks. It continues to battle wholesale trade and immigration policy upheaval, historic inflation rates, and the effects of government spending reductions. Meanwhile, imports have kept dropping. This decline is largely a result of new tariffs on shipments coming into the U.S. tariffs that former President Donald Trump first floated earlier this spring.
The latest account of economic progress was nearly released only to be affected by a government shutdown. Its release has been a cause for optimism among many economists. Aditya Bhave, senior economist at Bank of America, remarked on the economy’s unexpected resilience, stating, “This is an economy that has defied doom and gloom expectations basically since the beginning of 2022.” He further expressed confidence in the ongoing economic expansion: “I don’t see why that wouldn’t continue going forward.”
It’s no wonder then that Illinois’ policymakers are looking ahead with optimism. They think the U.S. central bank’s recent move to reduce interest rates will help strengthen economic growth. In addition, tax cuts are expected to continue stimulating the U.S. economy beginning in 2026.