We knew the U.S. economy was cooking with gas in the July to September period, but new data shows that the fire was even hotter than initially thought.
According to a revised estimate released Wednesday by the Commerce Department, gross domestic product grew at a 5.2% annualized rate in the third quarter, up from the 4.9% rate recorded in the initial estimate released last month. It was the fastest quarterly growth in nearly two years.
Overall, growth was driven by consumer spending, business investment and outlays by federal, state and local governments. The updated report adjusted consumer spending down slightly, from 4% to a still-healthy 3.6%, while raising private investment growth to a 10.5% rate.
“A blockbuster revision to what was already a blockbuster GDP number,” Jason Furman, who chaired the White House Council of Economic Advisers during the Obama administration, said.
At the same time, most analysts agree that growth is cooling. “We continue to forecast ongoing expansion in economic activity, but the pace should slow quite significantly” at the end of the year, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, per the Associated Press. “We anticipate a deceleration in household spending, not only on payback for an unusually strong third quarter but also from the cumulative effects of monetary policy tightening.”
Christopher Rupkey, chief economist at FWDBONDS in New York, had a similar take, while noting that there are still no signs of an impending recession. “No sign of darkening skies for the economy in today's report, but growth is cooling,” he said, per Reuters. “There's simply not as much wind in the economy's sails in the final quarter this year.”
Still, slower growth in the fourth quarter could still translate into significant expansion. “Resilience not recession is the R word during this holiday season,” said Joseph Brusuelas, chief economist at the consulting firm RSM. “Heading into the final month of the year the U.S. economy likely expanded at a 3% pace on the back of full employment.”