That’s because the United States economy is humming right along. This growth is continuing by the very powerful engine of consumer spending and huge investments in IT. The same U.S. gross domestic product (GDP) figure for the third quarter of this year calculated out to an annualized 4.3% growth. It’s not all good, and in fact this new figure might wildly exaggerate the robustness of our economy, as serious challenges still lie underneath.
Consumer spending is the biggest driving force behind keeping the U.S. economy afloat right now. Yet, it has withstood these challenges and continued to show strong resilience and positive influence on economic growth. Moreover, strong investments in the IT sector have been a stimulus to productivity and innovation, increasing the economy’s ability to outperform on every front.
Though all of these signs point to the same conclusion, inflation in the U.S. has been stubbornly sticky on the high side. The inflation rate announced in November was 2.7% year-over-year, which reflects a significant downward trend from prior months. Analysts think the recent government shutdown may have affected this data. This would have served to mechanically depress measured activity.
Turning to the labor market, the unemployment rate has edged up. This increase has led some analysts to question whether the rate of job growth is sustainable. This trend may be a troubling harbinger of the storm—a hardened and complicating reality with which workers and businesses will need to contend through tiger times.
In the background, international economic dynamics are crossing the stage. As for China, domestic demand looks anemic at best, which will reverberate throughout global supply chains and exacerbate trade frictions. Exports from China continue to do great guns, indicating a patchy nature to the performance within the region. There are encouraging signs from East Asia’s manufacturing sector, which has proven resilient in the face of prior U.S. tariff escalations.
East Asian manufacturers have adjusted to the shrinking trade space and remain a net positive force for regional economic prosperity. This adaptation can offer many fruitful lessons for U.S. policymakers looking to learn as they develop the next generation of U.S. trade strategies.