United States: A Temporary Pickup in Real GDP Growth

Although the size of the run-up in annualized real GDP growth in the US was surprising, it was still in line with our expectations. Good news for the economy has been building up all summer. This was especially the case for real consumer spending, which posted its biggest gain (4.0%) since the end of 2021. The three major spending categories (durable goods, nondurable goods and services) bounced back after faltering in the second quarter. It's worth pointing out that household savings dipped to 3.8% of disposable income in the third quarter from an average of 5.0% for the two previous quarters. This helped buoy consumption despite a loss of income.

But it's not all sunshine and rainbows. Private nonresidential investment edged down (annualized rate of -0.1%) for the first time since summer 2021. Investment in equipment also cooled, along with nonresidential construction (after two quarters of solid gains). It will be worth keeping an eye on these weak points to see if the stimulus from the Biden administration's economic program is already starting to fade. In contrast, residential investment ticked higher this summer after contracting for nine consecutive quarters. But the spike in mortgage rates in recent months suggests further hardship on the horizon for this sector. Meanwhile, economic activity was lifted by an upsurge in private inventory accumulation, which added 1.32 percentage points to real GDP growth. Government spending, which rose 4.6%, was one of the other factors that helped fuel economic growth this summer. As for federal military spending, it posted its biggest quarterly gain (8.0%) since the end of 2020.

Finally, at an annualized 6.2%, growth in exports also provided some lift, even though the rise in imports (5.7%) was almost as high.

The US economy remains unusually robust in a high interest rate environment where business and consumer confidence is relatively low. It's hard to believe this kind of situation can last. If it’s the case, the Federal Reserve would have no choice but to keep tightening monetary policy. But we expect growth to slow over the next few months and quarters. This could allow key rates to remain unchanged, but job creation and inflation will also need to slow down.