US Growth in the Third Quarter: Why Trade Doesn’t Tell the Whole Story

TVS News AI, editorially supervised, presents US Growth in the Third Quarter: Why Trade Doesn’t Tell the Whole Story.

3.4 percent instead of 3.2 percent – that was how upbeat the start to the fall was. According to an initial estimate from the US Department of Commerce in Washington, gross domestic product grew by 3.4 percent annualized in the third quarter compared with the previous quarter. Economists had expected an average of 3.2 percent. In the second quarter, the figure had been 2.2 percent. Der Spiegel reports a noticeable acceleration driven primarily by domestic demand.

Private Consumption Carried the Third Quarter

Consumer spending rose by 0.5 percent in September from the previous month. A month earlier, the increase had even reached 0.9 percent. As a result, private consumption remained not only an important engine in the economic data, but also a measurably strong force in the month-to-month development of demand.

This is noteworthy because prices were rising at the same time. Despite rising inflation, households spent more money. Stephan Bales of KfW Research attributes the resilience of the US economy to this development: Private consumption remains a support despite inflation, high fuel prices and rising interest rates.

Additional momentum came from the AI investment boom, which has been driving growth for several months. Two sources of demand were therefore at the center of the third quarter: consumer spending and investment in artificial intelligence. The difficult conditions have not disappeared, according to the report. It even speaks of strains caused by the Iraq war in the summer.

Why the 3.4 Percent Cannot Be Directly Compared with Europe

US figures are annualized, while European growth rates are not. That means you cannot directly equate 3.4 percent in the US with a European rate. The report offers a simple conversion: To obtain a growth rate comparable with Europe, the US rate must be divided by four. This turns 3.4 percent into 0.85 percent.

The statement nevertheless remains clear. The US economy grew more strongly in the third quarter than most economists had expected. The increase from the second quarter, which was still reported at an annualized 2.2 percent, also shows how much the pace improved within a year.

Resilient Does Not Mean Risk-Free

Bales himself names the strongest counterargument to the good news. The AI investment boom is increasingly being financed with debt. As a result, growth could become more vulnerable to sudden liquidity crises. Without the shock absorber of equity capital, a lack of profits at high interest rates can quickly lead to payment problems.

Behind the 3.4 percent there is therefore a two-part picture. Consumption shows that households are continuing to buy despite inflation. Investment-driven demand can lift growth, but according to Bales it comes with growing financing risk. The expansion is therefore robust, but not free from the strains of financing.

Foreign Trade Remains a Gap in the Picture

The report does mention 3.4 percent growth, a 3.2 percent expectation and consumer spending in September and August. However, it contains no specific figures on exports, imports or the contribution of foreign trade. It is therefore not possible to infer from these details how strongly or weakly foreign trade actually shaped the third quarter.

The other side of the story is more robust: The US economy accelerated its growth despite rising inflation. The upswing was driven by private consumption and AI investment. In an election season, five days before the US midterm elections, these figures pointed to a resilient US economy, according to Bales. For foreign trade, however, the answer remains an open question rather than a clear figure in the available data.