The United States economy demonstrated significant strength in the third quarter of 2023, expanding at an annual rate of 4.3% from July to September. This strong growth represents the best rate of growth we’ve had in two years. Perhaps most importantly, it represents a huge jump from last quarter’s growth rate of 3.8%. Analysts were looking for a much smaller, more tepid 3.2%, so the actual figure turned out to be much stronger than expected.
Consumer spending continued to be the main force driving this economic expansion, surging at an impressive annual rate of 3.5%. By comparison, it increased by just 2.5% in the third quarter of 2022. Households had the confidence to boost their spending, especially on health care services, a huge factor that’s been driving the economic momentum.
At the same time, exports rebounded strongly, increasing by 7.4%, as imports fell for the third-straight month. First, imports have dropped off dramatically, thanks to a fresh round of tariffs. These tariffs, originally announced by President Donald Trump for implementation earlier this spring, are levied on shipments going into the United States. This unusual but welcome combination of surging exports and strengthening imports has provided a significant positive contribution to the overall, broader economic picture.
The recent government shutdown pushed the release date for our most recent account of this robust growth. This huge disappointment is a reminder that the economic headwinds are still howling. The economy has been influenced by disruptive changes in trade and immigration policies, persistent inflation, and cuts to government spending.
Even with these encouraging growth numbers, some economists are warning that escalating prices may start to slow consumer spending in the months ahead. Oliver Allen, senior US economist at Pantheon Macroeconomics, indicated that recent surveys and credit card data suggest households may begin to rein in their spending.
“This is an economy that has defied doom and gloom expectations basically since the beginning of 2022.” – Aditya Bhave
Even Michael Pearce, chief US economist at Oxford Economics, sees encouraging signs for the trajectory of the economy — particularly as it approaches 2026. Noting that all of this could go wrong, he added that overall things look promising.
The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures price index, experienced enormous shifts during this period. It jumped to 2.8%, a sizable leap from 2.1% last quarter. This jump further highlights that inflation remains a nasty, daily concern for families faced with higher prices.
Aditya Bhave added, “I don’t see why that wouldn’t continue going forward,” emphasizing his belief in the resilience of the current economic situation.