US Economy Grows by 3.1% in Q3, Driven by Consumer Spending and Exports

The U.S. economy outperformed expectations in the third quarter, thanks to upward revisions in consumer spending and exports that enhanced the GDP growth rate from July to September.

This marks a slight increase compared to the second quarter’s GDP growth of 3 percent.

Officials attribute this revision to upward changes in real (inflation-adjusted) consumer spending, which surged by 3.7 percent over the three-month period. Spending on goods and services saw increases of 5.6 percent and 2.8 percent, respectively.

Furthermore, exports experienced a significant jump, with shipments up nearly 10 percent.

Government expenditures contributed over a quarter to the overall GDP estimate, increasing by more than 5 percent.

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In terms of inflation, the Federal Reserve’s preferred measure showed a decline during the third quarter.

Personal consumption expenditure (PCE) inflation decelerated to 1.5 percent, down from 2.5 percent in the previous quarter. Core PCE inflation, which excludes food and energy prices, dropped to a slightly higher-than-anticipated 2.2 percent from 2.8 percent.

After the December policy meeting, Federal Reserve Chair Jerome Powell emphasized the resilience of the economy.

“The U.S. economy is performing exceptionally well, much better than our global counterparts,” Powell stated during the post-meeting press conference. “The future looks promising for our economy.”

Analysts note that the U.S. economy is outpacing many other developed nations. As per the International Monetary Fund’s (IMF) latest forecasts, the United States is expected to consistently outperform several advanced economies.

In comparison, the Euro Area is projected to grow at a modest rate of 0.8 percent this year and 1.2 percent next year. Japan’s economy is expected to see a growth of 0.3 percent in 2024 and 1.1 percent in the following year. The UK’s growth rate is estimated at 1.1 percent this year and 1.5 percent in 2025.

A significant contributor to this disparity is the U.S.’s robust investment in research and development (R&D), as noted by Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments.

“Investment in R&D promotes productivity, leading to GDP growth in the U.S., which far exceeds that of other developed nations,” Tengler remarked in a statement shared with The Epoch Times. “We foresee the U.S. continuing to be the leading economy.”

With the anticipated changes in the incoming administration potentially reducing corporate tax rates and easing regulations, growth may exceed many forecasts.

Data from the National Center for Science and Engineering Statistics reveal that the U.S. allocated nearly $886 billion for R&D in 2022, in stark contrast to Japan and the UK, which spent $136 billion and $89 billion on R&D in the same year, respectively.

Additional Economic Insights

Financial markets assessed other economic data on December 19.

Continuing jobless claims—reflecting the number of individuals out of work who are eligible for unemployment insurance—remained relatively stable at 1.87 million. The four-week average for jobless claims, which mitigates weekly fluctuations, rose slightly to 225,500.

Manufacturing showed signs of ongoing decline this month.

U.S. stock markets were poised for a recovery following the selloff on December 18, seeing the blue-chip Dow Jones Industrial Average experience its first 10-day losing streak in half a century.

The major benchmark indexes were up about 0.8 percent before the market opened.

Treasury yields continued to rise, with the 10-year yield reaching 4.55 percent.

The U.S. dollar index, which measures the value of the dollar against a weighted basket of currencies, dipped below 108.00 but has increased by over 6 percent year-to-date.