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US GDP Surges to 3.4% in Third Quarter, Exceeding Expectations
· Confirmed
In Short: The US economy expanded at an annualized rate of 3.4% in the third quarter, surpassing expectations of 3% growth.
The US economy saw a significant boost in the third quarter, with gross domestic product (GDP) growing at an annualized rate of 3.4%, according to data released by the Commerce Department on Thursday. This growth rate exceeded economists' forecasts of around 3% and marked the strongest quarterly expansion in a year.
The acceleration in GDP growth was driven by robust consumer spending and a surge in artificial intelligence (AI) investments. Consumer spending increased by 3.8% annually, outpacing expectations and contributing significantly to the overall economic growth.
Business investment, excluding housing, was up 12.7% in the third quarter, reflecting the ongoing AI boom. Investment in information processing equipment surged by 37.4%, in software by 9.6%, and in research and development by 7.5%, indicating a substantial increase in technology-related spending.
However, the trade deficit in goods widened unexpectedly in September, driven by strong demand for capital goods linked to the AI infrastructure buildout. This development suggests that trade was a significant drag on economic growth in the third quarter, with some economists estimating that trade subtracted as much as four percentage points from GDP growth.
The Federal Reserve, which voted to maintain its benchmark interest rate at 3.75% to 4% on Wednesday, cited continued inflation concerns despite the strengthening economic activity. The Fed's preferred inflation gauge remained at 3.6% annually in September, considerably above the central bank’s 2% target.
The odds of a quarter-point rate hike at the Fed's next meeting in December are pegged at about 85%, according to CME Group's FedWatch Tool, a measure of market sentiment. This reflects the central bank's cautious approach to managing inflation amid a robust economic recovery.
The Commerce Department's Bureau of Economic Analysis reported that the third-quarter GDP growth of 3.4% exceeded the Bloomberg consensus estimate of 3.2% and rose 1.2 percentage points from the second quarter's 2.2%, marking the highest growth rate in a year. This growth outpaced the 2.5% annualized rate recorded over the first three months of the year.
While the economy showed strong growth, housing investment continued to struggle, dropping 3.3% in the third quarter. This marks the sixth decline in the last seven quarters, reflecting the impact of high mortgage rates on the housing market.
Background
The US economy expanded at an annualized rate of 3.4% in the third quarter, surpassing expectations of 3% growth.
What's confirmed
- The US economy saw a significant boost in the third quarter, with gross domestic product (GDP) growing at an annualized rate of 3.4%, according to data released by the Commerce Department on Thursday. This growth rate exceeded economists' forecasts of around 3% and marked the strongest quarterly expansion in a year.
- The acceleration in GDP growth was driven by robust consumer spending and a surge in artificial intelligence (AI) investments. Consumer spending increased by 3.8% annually, outpacing expectations and contributing significantly to the overall economic growth.
- Business investment, excluding housing, was up 12.7% in the third quarter, reflecting the ongoing AI boom. Investment in information processing equipment surged by 37.4%, in software by 9.6%, and in research and development by 7.5%, indicating a substantial increase in technology-related spending.
- However, the trade deficit in goods widened unexpectedly in September, driven by strong demand for capital goods linked to the AI infrastructure buildout. This development suggests that trade was a significant drag on economic growth in the third quarter, with some economists estimating that trade subtracted as much as four percentage points from GDP growth.
- The Federal Reserve, which voted to maintain its benchmark interest rate at 3.75% to 4% on Wednesday, cited continued inflation concerns despite the strengthening economic activity. The Fed's preferred inflation gauge remained at 3.6% annually in September, considerably above the central bank’s 2% target.
- The odds of a quarter-point rate hike at the Fed's next meeting in December are pegged at about 85%, according to CME Group's FedWatch Tool, a measure of market sentiment. This reflects the central bank's cautious approach to managing inflation amid a robust economic recovery.
- The Commerce Department's Bureau of Economic Analysis reported that the third-quarter GDP growth of 3.4% exceeded the Bloomberg consensus estimate of 3.2% and rose 1.2 percentage points from the second quarter's 2.2%, marking the highest growth rate in a year. This growth outpaced the 2.5% annualized rate recorded over the first three months of the year.
- While the economy showed strong growth, housing investment continued to struggle, dropping 3.3% in the third quarter. This marks the sixth decline in the last seven quarters, reflecting the impact of high mortgage rates on the housing market.
What's still developing
- Nothing material beyond the confirmed record.