In the current third quarter of 2023, the U.S. economy just blasted off at a 4.3% annual rate. Analysts had widely anticipated growth, but not at this rate. That three-month growth figure, for the three months ending in September, shot way over everyone’s predictions. It ballooned to a much higher 7.9% instead of the expected 3.2%. This robust performance indicates resilience amid ongoing challenges related to trade policies and inflation.
Analysts can’t help but observe that the expansion has occurred even with plenty of economic headwinds. The U.S. economy is experiencing cataclysmic shifts, chiefly in trade and immigration policy. Yet at the same time, it’s contending with chronic inflation and austerity at the federal level. It was cause for celebration, because consumer spending was the unlikely engine behind this surprise growth.
This sounds great until you realize that in the third quarter, consumer spending skyrocketed at an annual rate of 3.5%. Households increased their consumption, especially of healthcare services. Exports continue to set records, climbing 7.4% and greatly benefiting the entire economy in the process. These set of figures paint a picture of a healthy, resilient consumer base that keeps pushing the economy forward.
Michael Pearce, chief U.S. economist at Oxford Economics, struck an optimistic tone about the economy’s current trajectory. He said the future is bright, the U.S. economy couldn’t be better positioned for 2026. Recent Federal Reserve moves to lower interest rates played a big role in creating this rosy outlook.
“This is an economy that has defied doom and gloom expectations basically since the beginning of 2022.” – Aditya Bhave
Illustrating that point, the Fed’s preferred inflation measure, the personal consumption expenditures price index, either 2.8% over the same span. This is a small uptick from the last quarter’s rate of 2.1%. While this latest rise in inflation is an indication of continued market corrections, it does not appear to dampen the overarching positive momentum for growth.
Imports, typically a negative contributor to U.S. economic growth, declined even more dramatically. That sharp downturn was due to a wave of tariffs on incoming cargo that President Donald Trump rolled out earlier this year. This significant decline in imports likely indicates a strategic redirection of trade and business relationships.
Bhave commented on the extraordinary resilience of the U.S. economy, hinting that the upbeat growth streak is set to last longer.
“I don’t see why that wouldn’t continue going forward.” – Aditya Bhave