Strong Growth in US Q3 GDP Exceeds Projections

In the third quarter of 2023, the US economy expanded by 5.2%, propelled by increased investment, consumer spending, and consistent inflation, leading to an improved economic forecast.  

Highlights

• Q3 GDP surges to 5.2%, indicating a strong economic expansion.
• Increased investments and government spending fuel the rise in GDP.
• Both corporate profits and personal income experience significant growth.

Economic Expansion in Q3:

The U.S. economy experienced significant growth in the third quarter of 2023, with the real gross domestic product (GDP) rising by 5.2% annually, marking a notable increase from the 2.1% expansion in the previous quarter. This uptick in GDP, based on more comprehensive data than the initial estimate of 4.9%, indicates robust economic activity.

Detailed Analysis of Growth:

The upward adjustment in GDP growth mainly reflects an uptick in nonresidential fixed investment and higher state and local government spending. However, these gains were partly offset by a decrease in consumer spending, which is a crucial component of the economy. Imports, which impact GDP calculations negatively, were revised downward.

Sector-Specific Contributions:

The overall increase in real GDP was supported by various sectors. Consumer spending, private inventory investment, exports, and government spending all had positive contributions. Notably, both residential and nonresidential fixed investments increased. The acceleration in GDP growth in Q3, compared to Q2, was mainly due to increased consumer spending, private inventory investment, and an upswing in exports.

Financial Indicators and Inflation:

The current dollar GDP saw a substantial rise of 8.9%, reaching $27.64 trillion, representing an upward revision from the previous estimate. Inflation, measured by the gross domestic purchases price index, remained stable at 3.0%. The Personal Consumption Expenditures (PCE) price index, a key inflation indicator, increased by 2.8%, with a slight downward revision. Excluding volatile food and energy prices, the PCE price index also saw a minor downward revision, rising by 2.3%.

Personal Income and Corporate Profits:

Current-dollar personal income saw a significant increase, largely driven by rises in compensation, nonfarm proprietors’ income, and personal interest income. Disposable personal income and real disposable personal income also experienced growth, with a marginal increase in the latter. The personal saving rate was revised upwards to 4.0%. Corporate profits saw a substantial increase in the third quarter compared to the previous one.

Gross Domestic Income and Future Outlook:

Real gross domestic income (GDI) increased by 1.5% in Q3, compared with a 0.5% increase in Q2. Looking ahead, the substantial growth in both GDP and GDI, alongside increasing corporate profits, signifies a positive outlook for the U.S. economy as it approaches the end of 2023.