US economy clocks in another solid quarter

Data: In the third quarter, the US economy grew by 2.8% (this and all subsequent growth rates are annualized rates of change over the previous quarter). This is roughly in line with economists' expectations (3.0%).

Details: Growth was driven in particular by consumption and parts of corporate investment. Consumers spent 3.7% more. At the same time, investment in equipment (+11.1%) jumped. In addition, government spending (+5.0%), which was driven by a strong increase in defense spending, provided support.

By contrast, residential construction (-5.1%) and investment in structures (-4.0%) shrank again due to high interest rates. In the case of the latter, the momentum provided by various government funding programs, for example for the construction of semiconductor factories, is clearly weakening. In addition, a high vacancy rate for offices is depressing new construction.

Exports (+8.9%) and imports (+11.2%) also rose sharply. The latter reflects strong domestic demand on the one hand. On the other hand, many companies may have wanted to bring their goods to the US before the feared tariff increases.

Interpretation: The US economy continues to grow strongly. This applies in particular to private domestic final purchases (PDFP), i.e. gross domestic product excluding inventory investment, government spending and foreign trade. Federal Reserve Chairman Powell has emphasized this figure on several occasions because it provides a clearer signal of the trend in demand. In the third quarter, PDFP increased 3.2%. This is one of a series of six quarters with fairly stable and strong growth between 2.5% and 3.5%. Although key interest rates are quite high, financing conditions in the overall economy remain favorable in view of record high equity prices and low risk premiums.

Today's figures confirm our assessment that the US economy should avoid a recession. That said, it is unlikely to be able to maintain the high pace of growth seen in recent quarters as the extremely high level of immigration, which also supported demand, is not likely to be repeated. Furthermore, the labor market is cooling on trend, which is why private consumption should lose momentum. However, a more accurate outlook for 2025 will only be possible after the election.

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