US Third Quarter GDP Skyrockets to 4.9%, Doubling Q2 Growth

Highlights

• GDP climbs 4.9% in Q3, outshining 2.1% in Q2.
• Growth driven by consumer spending, private inventory.
• Personal savings rate dips from 5.2% to 3.8%.

Third Quarter 2023 GDP Overview

Real gross domestic product (GDP) saw a rise of 4.9% in Q3 2023, nearly double the growth rate of 2.1% in the preceding quarter, as per the Bureau of Economic Analysis’ advance estimates. However, it’s worth noting that this data might be updated, with a more comprehensive report scheduled for November 29, 2023.

Factors Driving Growth

The surge in GDP is attributable to increased consumer spending across both goods and services. The primary contributors within the services sector included housing and utilities, health care, financial services, and food services. Meanwhile, other nondurable goods, notably prescription drugs, as well as recreational goods and vehicles, led the goods sector. There were also notable increases in private inventory investment, especially in manufacturing and retail trade, and growth in federal, state, and local government spending. However, a decline in nonresidential fixed investment slightly dampened this growth.

Comparative Analysis

The third quarter saw the GDP growth rate accelerate, driven primarily by faster consumer spending, private inventory investment, and federal spending. Additionally, there were improvements in exports and residential fixed investment. On the contrary, nonresidential fixed investment saw a dip, and state and local government spending slowed. The third quarter’s current dollar GDP grew by 8.5%, reaching $27.62 trillion, while the price index for gross domestic purchases went up by 3.0%.

Personal Financial Landscape

On the personal finance front, the third quarter saw an increase in current-dollar personal income by $199.5 billion, although this was lower than Q2’s growth. Despite an increase in disposable income, the real disposable personal income dipped by 1.0%. Savings declined too, with the saving rate falling from 5.2% in Q2 to 3.8% in Q3.

Short-Term Forecast

Given the overall robust growth in GDP, combined with increased consumer and government spending, the short-term outlook for the economy appears bullish. However, the downturn in personal savings and nonresidential fixed investment might be areas to watch closely in the coming months.