The US economy is demonstrating remarkable sustainability. GDP growth in Q3 2023 is projected to reach 4.9% according to the SAAR methodology (seasonally adjusted annualized rate).
GDP Growth Projection and Historical Facts
Excluding the recovery in 2020 - 2021, which occurred on a low base due to the COVID lockdown effect, the current momentum is the strongest in 15 years. A faster recovery was only observed once before, in Q2 2014.
- Household consumption made a positive contribution of 2.7 percentage points to the overall GDP growth of 4.9%. From 2014 to 2019, the usual positive contribution was 1.8 percentage points. Demand for goods contributed 1.1 percentage points (compared to the pre-crisis norm of 0.9 percentage points), and demand for services contributed 1.6 percentage points (compared to the norm of 1 percentage point).
- Gross investment contributed 1.5 percentage points compared to 0.7 percentage points in the 2014 - 2019 period. The main effect here is inventory growth, with a 1.3 percentage point increase (compared to the norm of minus 0.1 percentage points). Fixed investment contributed only 0.15 percentage points, as opposed to 0.7 - 0.8 percentage points in the 2014 - 2019 period.
- There is an acceleration in government consumption and investment, resulting in a positive contribution of 0.8 percentage points, almost three times the norm. There is a slight acceleration in the defense segment, contributing 0.28 percentage points compared to zero effect in 2014 - 2019.
- Net exports made a negative contribution of 0.1 percentage point, which is an improvement from the negative contribution of 0.3 percentage points in 2014-2019. This is due to the acceleration of import growth (minus 0.75 percentage points) relative to the pace of export recovery (plus 0.68 percentage points).
Thus, consumer demand and inventory growth were the main factors of GDP growth in Q3 2023.
However, the real concern is that consumption is growing at a record pace despite significant increases in consumer and mortgage borrowing costs, declining personal income growth rates, and the near exhaustion of accumulated excess savings from 2020 - 2021.
Conclusion
In conclusion, the resilience of the U.S. economy in Q3 2023, marked by strong GDP growth (4.9%), demonstrates its ability to overcome challenges. Notably, consumer demand and inventory growth played a key role in this remarkable performance, supported by historically low savings rates and savings inflows from the 2020 - 2021 fiscal and monetary measures. However, the sustainability of this growth is becoming increasingly questionable as rising consumer and mortgage borrowing costs, lower income growth and the depletion of the previous year's excess savings pose serious challenges.