Solid Service-Driven Consumer Spending and Strong Net Exports
Inflationary Pressures Slightly Intensify
The U.S. economy achieved a growth rate exceeding 4% in the third quarter of this year, marking the fastest pace in two years. Robust consumer spending served as the key driver behind this 'surprise growth.'
According to the Bureau of Economic Analysis (BEA) under the U.S. Department of Commerce on December 23 (local time), the advance estimate for real gross domestic product (GDP) in the third quarter showed an annualized growth rate of 4.3% compared to the previous quarter. This figure is an improvement over the second quarter's growth rate of 3.8% and significantly surpasses the market expectation of 3.2% compiled by Dow Jones. It also far exceeds the upper 1% range, which is considered the U.S. potential growth rate.
Previously, the U.S. economy experienced negative growth of -0.6% in the first quarter as imports surged ahead of President Donald Trump's imposition of high tariffs. However, the economy achieved a 'V-shaped rebound' with 3.8% growth in the second quarter, and the strong growth momentum continued into the third quarter.
The third quarter's surprise growth was driven by expanded consumer spending and the partial rollback of President Trump's tariff policies, demonstrating that the U.S. economy continues to maintain strong momentum. The growth rate of consumer spending jumped from 2.5% in the second quarter to 3.5% in the third quarter, leading the overall growth. Solid spending in the services sector, including healthcare and overseas travel, supported this increase, although automobile spending declined.
Exports and government spending also contributed to growth, and the reduced decline in private fixed investment helped sustain the expansion. Notably, exports rose by 8.8% in the third quarter, while imports fell by 4.7%. As a result, the trade balance improved, and net exports contributed 1.6 percentage points to the third quarter's growth rate. Government spending increased by 2.2%, raising the growth rate by 0.39 percentage points.
The final sales to private domestic purchasers, an indicator reflecting the underlying demand in the U.S. economy, recorded a 3% increase. This is the highest level in a year, and the fact that this indicator, which is closely watched by the Federal Reserve (Fed), is elevated indicates that the fundamental strength of the U.S. economy remains solid.
However, inflationary pressures have somewhat intensified. The core personal consumption expenditures (PCE) price index, which the Fed considers most important, rose by 2.9% in the third quarter, up from 2.6% in the second quarter. The core PCE price index, which excludes food and energy, is used to gauge the underlying trend of inflation.
Eliza Winger, an economist at Bloomberg Economics, stated, "The growth momentum in the third quarter remained solid," and added, "Although the annual growth rate was somewhat reduced due to the federal government shutdown (temporary work stoppage), much stronger growth is expected in 2026."
President Trump commented on his social networking service (SNS), Truth Social, stating, "Tariffs have created great economic indicators for America."
However, due to high import tariffs and the continued impact of inflation, the year-on-year growth rate for the third quarter was limited to 2.3%, showing some moderation.
Meanwhile, the advance estimate for third quarter GDP was originally scheduled to be released on October 30, but the schedule was canceled due to the shutdown. The U.S. typically announces GDP growth rates in three stages: advance, preliminary, and final estimates. However, due to the longest shutdown in history, only two releases will be made this time. This figure corresponds to the first stage, the advance estimate.
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