United States: Stronger Real GDP Growth over the Summer

The US economy continues to show remarkable resilience. Despite the challenges posed by higher energy prices and weaker confidence, real GDP posted its best performance in a year. That said, the third-quarter results did not come as a surprise: the 3.4% gain was in line with our forecast, and the economic indicators released since the summer clearly pointed to robust growth.

The resilience—indeed, the strength—of real consumption is particularly noteworthy, with a second straight gain of 3.8% annualized. Faster growth in spending on services more than offset a slowdown in spending on durable goods, particularly motor vehicles. Although real disposable income rose 2.3% in the third quarter, that was not enough to sustain such strong consumption growth. As a result, the household saving rate declined once again, falling to 4.1%, its lowest level since 2022. Consumption growth is likely to be weaker in the fourth quarter, as suggested by the stagnation in real spending in September.

Non-residential business investment remains very strong, posting its best quarterly growth since the summer of 2011, excluding the post-pandemic rebound. The technology sector—and artificial intelligence in particular—once again played a major role, with computer equipment up 37.4% annualized. Industrial equipment has also posted strong growth of more than 20% in each of the past two quarters. Non-residential construction recorded its strongest growth in three years, thanks in part to a rebound in mining and oil and gas extraction structures (+16.9%) and in data centres (+127.2%).

Investment was fuelled to a large extent by imports. Total goods imports jumped 26.4% annualized. Combined with a decline in exports, this resulted in a negative contribution of 3.3 percentage points to real GDP growth. That said, the surge in imports also reflects expectations of new tariff announcements from the Trump administration. Imports were therefore also used to restock businesses’ shelves and warehouses. Inventories rose in the third quarter, following five consecutive quarterly declines.

Finally, federal government spending rose sharply, outpacing even the rebound that followed last year’s government shutdown. The war in Iran naturally boosted military spending (+11.7%), but non-defence spending also climbed 22.2%. This partly reflects movements in the Strategic Petroleum Reserve.

What can we expect from here? A great deal hinges on two factors. The first is the resilience of consumers and their willingness to draw down their savings in order to keep spending at a solid pace. The second is whether the momentum in AI-related investment is sustained. If both of these elements remain in place, growth should continue to hold up.

US real GDP is still growing briskly. Solid performances in services consumption, investment in computer equipment and government spending contributed to the acceleration in economic growth over the summer. If the economy continues to perform well in the coming months, the Federal Reserve will likely have to raise its policy rate at its December meeting, after opting to hold steady this week.