United States: GDP growth remains elevated in Q3
GDP reading: GDP growth dipped to 2.8% in seasonally adjusted annualized rate terms (SAAR) in the third quarter, from 3.0% in the second quarter. However, the reading was likely by far the strongest in the G7, marking a continuation of the U.S.’ outperformance relative to other major advanced economies—a constant since 2023. On an annual basis, economic growth edged down to 2.7% in Q3 compared to the previous period’s 3.0%.
Drivers: Looking at expenditure components, private consumption improved to 3.7% SAAR in the third quarter (Q2: +2.8% SAAR). Government spending, meanwhile, improved to a 5.0% expansion in Q3 (Q2: +3.1% SAAR). Fixed investment growth fell to 1.3% in Q3 (Q2: +2.3% SAAR).
On the external front, exports of goods and services growth improved to 8.9% in seasonally adjusted annualized terms in the third quarter (Q2: +1.0% SAAR). In addition, imports of goods and services growth picked up to 11.2% in Q3 (Q2: +7.6% SAAR).
GDP outlook: Our panelists expect the economy to settle into a slightly slower gear from Q4, though risks appear skewed to the upside in light of the economy’s robust growth so far this year.
Panelist insight: On the near-term outlook, TD Economics’ Thomas Feltmate said:
“Economic growth is likely to round out the year on a softer note, as a further cooling in the labor market leads to some moderation in consumer spending. Equipment investment also looks poised for some giveback after two consecutive quarters of very healthy gains, while Q3’s gain in federal defense spending is unlikely to repeated in Q4. We also can’t forget that fourth quarter growth is likely to see some distortions stemming from hurricane’s Helene and Milton.”