The US economy as measured by GDP grew at an annual rate of 4.3% in the third quarter through September. This production increase represents the quickest rate of growth that’s come in two years. This strong performance blew past all analysts’ expectations, who had predicted a much lower growth figure of around 3.2%. The latest economic report highlights a period of resilience for the US as it navigates through significant trade and immigration policy changes.
Healthy consumer spending drove most of this economic expansion, increasing at an annualized rate of 3.5%. This is a significant jump compared to the prior quarter’s growth of 2.5%. The rise in consumer spending reflects better domestic demand and a further plus to the is by now almost certain strong growth in this quarter.
Exports also bounced back big time, jumping 7.4% following an earlier drop. This encouraging development in exports is a sign of a partial stabilization in global trade, which has been under attack in recent months. On the other hand, imports remained in net negative territory, probably due in part to the tariffs the administration levied on shipments arriving in the US back in spring.
The Fed’s primary, preferred measure of inflation, the personal consumption expenditures price index, just hit 2.8%. This increase is a 0.6 percentage point increase from the last quarter’s increase of 2.1%. This jump indicates that though the economy is expanding rapidly and growing more resilient, inflationary pressures are building quickly.
That important economic report has finally come, delayed by this fall’s US government shutdown. It provides a more complete view of an economy that is learning to navigate new policy terrains.
“This is an economy that has defied doom and gloom expectations basically since the beginning of 2022.” – Aditya Bhave, senior economist at Bank of America
Analysts remain cautiously optimistic about future growth. Michael Pearce, chief US economist at Oxford Economics, is pretty darn sure this economic momentum is here to stay. Oliver Allen, senior US economist at Pantheon Macroeconomics, is with Oliver on that optimism. Bhave anticipates that this trend will continue, stating, “I don’t see why that wouldn’t continue going forward.”
The economy will get an added boost from last year’s tax cuts. On top of this, the Federal Reserve intends to cut interest rates beginning in 2026, providing a significant growth stimulus. We expect these measures to add even more fuel to the already blazing hot consumer spending and investments fires.