The US Economy’s Best Showing in Two Years
There has been no shortage of stories about the uncertainty that permeates the US economy. Consumers tell surveyors that they are worried about the future. In addition, there are occasional examples of companies citing “persistent macroeconomic headwinds and weak consumer spending” in their commentary.
But a long-delayed report on US Gross Domestic Product (GDP), the broadest measure of US economic activity, tells a different story.
GDP expanded at a 4.3% annualized rate in the third quarter, the fastest pace in two years, according to the US Bureau of Economic Analysis.
The report reveals that consumers are keeping the economy afloat, even though inflation remains stubbornly above the Fed’s 2% goal, consumer confidence surveys suggest people aren’t feeling very upbeat, and the unemployment rate has been gradually rising.
In addition, massive spending on AI data centers is also underpinning growth.
But the good news on the economy comes with a catch. The report highlights activity between July and September. It’s old data. Or, as economists typically frame it, the data is ‘stale.’
Still, there’s not much evidence that economic activity is stalling. Still, those on the lower rungs of the economic scale are being squeezed, while the wealthy are more than making up the difference, given greater savings and a booming stock market.
As we look to 2026, a sluggish hiring picture could dampen economic activity, while recent Fed rate cuts and fiscal stimulus in the just-passed tax bill seem set to support the economy next year.