The U.S. economy roared back with a 4.3% annual growth rate in the third quarter of this year. That represents the most robust growth we’ve experienced in two years. This strong increase follows a 3.8% growth rate from the last quarter, reflecting a powerful economic turnaround. Much of this recent expansion has been propelled by significant changes in trade and immigration policy. Cuts to federal government spending have been important.
Consumer spending, the bedrock of the U.S. economy, increased at a 3.5% annual rate in Q3. This represents a positive jump from 2.5% in Q2. This is a positive signal, as it points toward consumers becoming more confident in their ability to spend despite persistent headwinds. First and most encouraging, consumer expenditure is booming! In addition to confirming that consumers remain flush with cash, it demonstrates a continued willingness to spend despite increasing anxiety over inflation.
While the growth figures present an optimistic view of the economy’s state heading into the end of the year, they reveal underlying complexities. As the labor market cools, fears of job loss are becoming more salient. On top of that, nearly three in four Americans report being frustrated by inflation, which remains a drag on real purchasing power.
This story confounds the third quarter data because it shows a huge jump in exports, rising 7.4%. This increase comes after a time when exports had drastically contracted, highlighting a possible rebound in global trade. Meanwhile, imports have fallen off the cliff. This drop is due to recently imposed tariffs on imports that President Donald Trump laid out earlier this spring. The drop in imports continues to highlight shifts in trade that are occurring.
In spite of these up and down numbers, the economic expansion was stronger than expected by most economic forecasters. The latest figures provide a clearer understanding of the economy’s trajectory following delays in data collection caused by the US government shutdown.