Third-quarter U.S. GDP grew an astounding 4.9% year over year, well ahead of consensus expectations of 4.5%. This was the fifth strongest quarter of economic growth seen in the 21st century outside of the pandemic-influenced recovery in 2020 and 2021. On the back of this improvement, the soft landing consensus has become more firmly entrenched, with economic growth expectations for the fourth quarter of 2023 and 2024 both drifting a few tenths higher during October.
Personal consumption expenditures were robust in the third quarter. Consumption came in at 4%, accounting for over half of the growth in economic activity in the third quarter. Given the large weight of consumption in GDP, it is perhaps unsurprising that periods of strong economic growth typically coincide with periods of strong consumption growth. What is surprising, however, is that consumption has historically remained strong right up to — or even past the start of — a recession. In fact, consumption was positive in the quarter before the onset of each of the last eight recessions and stayed positive even as the recession started in five of those eight instances.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.