Strength in the US economy was quite remarkable during the third quarter, as the economy grew at a real annualized rate of 4.3%. This growth significantly surpassed economists’ expectations and marked an increase from the previous quarter’s rate of 3.8%. The strong showing is indicative of a broad based recovery, led mostly by strong consumer spending and exports.
Key to this growth was strong consumer spending, which increased 3.5% in Q3. That was on top of a 2.5% q/q advance in the second quarter. This increase is a sign that households are still able and willing to spend in the face of persistent economic headwinds, providing a boost to economic activity overall. A rising level of consumer expenditure is a good indicator of positive economic health. This spending represents over three-quarters of the American economy.
On top of that, the export sector was a star performer as well, with exports surging by a whopping 8.8% in Q3. This is a welcome and remarkable turnaround from the last quarter when exports dropped by 1.8%. Exports are rebounding. Exports are on the rebound because global demand for American goods and services is skyrocketing. That means the U.S. is honing its competitive edge in markets around the world.
For all the good economic news, market futures showed that investors had a very negative view of the economic situation. DJIA futures were off 40 points, while S&P 500 futures still made a modest dip of 0.06%. The Nasdaq 100 futures slid 0.08%. This week’s drop reflects a bit of jitters in the stock market following the announcement of the strong economic growth numbers.
Most analysts agree that even though the growth figures for third quarter are a positive sign, the storm clouds might not be far away. Risks including inflationary pressures, supply chain disruptions, and geopolitical tensions are all potential drags on economic performance in the years ahead. Investors and policymakers alike will be watching these developments with great interest, trying to determine what they might portend for the overall economy.