The U.S. economy showed unexpected strength in the third quarter, expanding at its fastest pace in two years and defying concerns about consumer confidence and inflation.
The Commerce Department released data showing that inflation-adjusted Gross Domestic Product (GDP) grew at a brisk annualized rate of 4.3% from July to September.
This acceleration marks a significant jump from the 3.8% growth recorded in the second quarter and far exceeded the forecasts of most economists.
This increase is attributed to the following main factors:
Resilient consumer spending
The recently released report indicated that a resilient American consumer is the main driver of growth. Consumer spending, which accounts for about two-thirds of economic activity, accelerated at a pace of 3.5%, up from 2.5% in the previous quarter.
Additionally, spending remains strong across categories, underscoring widespread consumer confidence in daily economic activity.
Strong rebound in exports
An important turning factor was the rebound in exports. They had declined to a rate of -1.8% in the second quarter, so the rebound contributed greatly to the overall GDP acceleration.
The shift shows stronger global demand for U.S. goods and services with beneficial changes to trade flows and supply chains driven by recent trade policy adjustments.
Increase in government spending
The report highlights that increased defense spending contributed to energy growth in the middle of the year. Analysts point out that federal government spending plays a direct factor in the growth of the economy.
Additionally, consistent spending at other levels of government also laid a stable foundation.
Higher corporate profits
After a near stagnation in the second quarter (just $6.8 billion higher), corporate profits rebounded sharply. It indicates the sustained pricing power and operational efficiency of companies, which helps future investment and wage growth potential.
Underlying strength of the private sector
A basic measure of domestic demand that combines private investment and household consumption remained stable. This reflects that the growth was not a statistical fluke, but rather reflected genuine underlying economic momentum.
In short, the third-quarter surge was not driven by a single factor but by a confluence of resilient U.S. consumers (especially at the high end), a booming export sector, active government spending, and healthy corporate profits that created a picture of an economy outperforming despite persistent inflationary pressures.
