US economic growth accelerates in third quarter
The U.S. economy grew faster than expected in the third quarter, driven by strong consumer spending, but the momentum appears to have weakened due to the rising cost of living and the recent government shutdown.
Gross domestic product increased at an annualized rate of 4.3 percent last quarter, the Commerce Department’s Bureau of Economic Analysis said Tuesday in its first estimate of third-quarter GDP.
The economy grew by 3.8 percent in the second quarter.
Economists polled by Reuters had predicted GDP would rise by 3.3 percent.
The data was delayed by the 43-day government shutdown and is now out of date.
Consumer spending rose 3.5 percent last quarter after advancing 2.5 percent in the second quarter.
Much of the acceleration in consumer spending came from a rush to buy electric vehicles before tax credits expire on Sept. 30.
Motor vehicle sales fell in October and November, while spending elsewhere was mixed.
The nonpartisan Congressional Budget Office estimates that the shutdown could shave between 1.0 and 2.0 percentage points of GDP in the fourth quarter.
It was estimated that most of the GDP decline would be offset, but between US$7 billion ($A10 billion) and US$14 billion ($A21 billion) would not be recovered.
Surveys show consumer spending is being driven by higher-income households, thanks to a stock market boom that boosts household wealth.
By contrast, middle- and lower-income consumers are struggling with the rising cost of living due to President Donald Trump’s sweeping tariffs, creating what they call a K-shaped economy, economists said.
This phenomenon is happening among businesses.
Economists said big companies have mostly managed to withstand the blow of cost-increasing import duties and are investing in artificial intelligence.
But small businesses are struggling with tariffs.
Trump’s policies are contributing to what economists call an affordability crisis, which is hurting Trump’s approval ratings.
Households are also facing higher electricity bills as the rapid growth of artificial intelligence and cloud computing data centers increases electricity demand.
Some will face skyrocketing health insurance premiums in 2026.
The Federal Reserve this month cut its benchmark overnight interest rate by another 25 basis points to a range of 3.50-3.75 percent, but signaled that borrowing costs are unlikely to fall in the near term as policymakers wait for clarity on the direction of the labor market and inflation.
