The US economy indicated unexpected strength in the third quarter, expanding at the fastest pace in two years and defying concerns about consumer sentiment and inflation.
The Commerce Department released data showing that inflation-adjusted gross domestic product (GDP) grew at a strong 4.3% annual rate from July to September.
This acceleration marks a big jump from growth of 3.8% in the second quarter and far exceeded most economists’ forecasts.
This increase is attributed to the following primary factors:
Robust consumer spending
The recently released report cited a resilient American consumer as the primary growth driver. Consumer spending, which accounts for about two-thirds of economic activity, accelerated to a 3.5% pace, up from 2.5% in the previous quarter.
In addition, spending remains robust across categories, highlighting broad consumer confidence in day-to-day economic activity.
Strong recovery in exports
A significant swing factor was the recovery in exports. They had fallen to -1.8% in Q2, so the recovery contributed significantly to overall GDP acceleration.
The reversal shows stronger global demand for US goods and services, with beneficial shifts in trade flows and supply chains driven by recent trade policy adjustments.
Increased public spending
The report highlights that increased defense spending helped power growth in the middle of the year. Analysts note that federal government spending plays a direct factor in the growing economy.
Moreover, consistent spending at other levels of government also laid a stable foundation.
Stronger corporate profits
After a near-stall in Q2 (an increase of only $6.8 billion), corporate profits rose significantly. It indicates companies’ sustained pricing power and operational efficiency, which helps with future investment and wage growth potential.
Underlying strength in the private sector
A key measure of domestic demand that combines private investment and household consumption stably. This reflects that the growth was not a statistical blip, but reflected real, underlying economic momentum.
In short, the rise in the third quarter was not driven by a single factor, but a confluence of resilient US consumers (especially at the higher end), a booming export sector, active government spending and healthy corporate profits, creating a picture of an economy that is doing better despite persistent inflationary pressures.
