U.S. economy roared back at 4.3% annual pace in third quarter. That growth represents the best annual performance in two years. This is a much better annual growth rate than analysts were expecting, with expectations for a more conservative annual pace of 3.2%. Of course, between July and September, consumer spending really shot up. This dramatic increase in federal spending, combined with an increase in exports, had a tremendously positive impact on the economy overall.
So far this summer, the new data indicates that consumers opened their wallets wide, spending at an annualized rate of 3.5%. That would be a big leap from the 2.5% growth seen in the last quarter. Households made a historic leap in spending on health care services, which was the primary driver of this economic growth. Additionally, exports increased by 7.4% during the same time, illustrating a strong, expanding demand for American-made goods overseas.
Imports were still on a downward trend, a sign that recent tariffs were having a negative effect on shipments coming into the U.S. economy. The bottom line third quarter economic growth number looks like a strong recovery. While these effects are certainly welcomed, they’ve been achieved against long odds—most notably with jarring changes in trade and immigration policy, ongoing waves of inflation, and reductions in government spending.
Despite these challenges, Aditya Bhave, an economist, remarked on the resilience of the U.S. economy, stating, “This is an economy that has defied doom and gloom expectations basically since the beginning of 2022.” He expressed optimism for the future, adding, “I don’t see why that wouldn’t continue going forward.”
The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures price index (PCE), just jumped 2.8% in the three months ended September. This represents an uptick from the last quarter’s rate of 2.1%. This rise is a clear indication of persistent inflationary fears that may play a role in future fiscal policy decisions.
The recent government shutdown pushed back the release of this major economic report. Unexpectedly released this week, the report provides a wealth of invaluable information about the overall state of the U.S. economy as we look ahead to an increasingly complicated array of domestic and global challenges.