It follows a three-month period where the US economy grew at a record annualized rate of 4.3%. That remarkable expansion marks the quickest clip the economy has achieved in two years. That made for a higher growth rate than most had been anticipating, and a major jump up from the 3.8% number seen in the last quarter. Analysts had been expecting a year-over-year growth rate of approximately 3.2%. This amazing figure was despite inflation, despite crazy, unpredictable, inflationary government spending.
Consumer spending was the hero for underscoring this impressive growth spell. By comparison, over the same time period, consumer spending grew at a compounded 3.5% rate. Households significantly stepped up their demand for healthcare services, indicating a continued reallocation of spending even as the job market cools.
Given the surprise cut to growth in the third quarter, that would be an impressive feat. The 7.6% increase in exports, which were up 7.4%, contributed to this stellar performance. Conversely, imports kept falling – a result of new tariffs on foreign shipments and the foreign supply chain still adapting to new U.S. trade policies. This combination of factors has contributed to a complex economic landscape shaped by persistent inflation and changes to immigration policies.
In another sign of inflation pressures, the personal consumption expenditures price index — a key inflation measure for the US economy—to 2.8% for this quarter. That’s an increase from 2.1% last quarter. Oliver Allen, senior US economist at Pantheon Macroeconomics, noted that households are beginning to clamp down on their outlays. This change has the potential to dramatically reshape long-term economic success.
Even through these fierce headwinds, some experts are confident that the US economy is on a long-term positive trajectory. Michael Pearce, chief US economist at Oxford Economics, wrote shortly after the announcement that the economy is on a strong footing as it heads toward 2026.
Aditya Bhave, an economist with Bank of America, emphasized the resilience of the US economy:
“This is an economy that has defied doom and gloom expectations basically since the beginning of 2022.”
He further stated,
“I don’t see why that wouldn’t continue going forward.”