Q3 GDP Report: US Economy Grows Faster Than Expected Consumer spending led the way but is expected to fade in the next quarters.

About 2 in 3 Americans say their household expenses have risen over the last year, but only about 1 in 4 say their income has increased in the same period, according to a new poll from The Associated Press-NORC Center for Public Affairs Research.

As household expenses outpace earnings, many are expressing concern about their financial futures. What’s more, for most Americans, household debt has either risen in the last year or has not gone away.

Steve Shapiro, 61, who works as an audio engineer in Pittsburgh, said he’d been spending about $100 a week on groceries prior to this past year, but that he’s now shelling out closer to $200.

“My income has stayed the same,” he said. “The economy is good on paper, but I’m not doing great.”

About 8 in 10 Americans say their overall household debt is higher or about the same as it was a year ago. About half say they currently have credit card debt, 4 in 10 are dealing with auto loans, and about one in four have medical debt. Just 15% say their household savings have increased over the last year.

Tracy Gonzales, 36, who works as a sub-contractor in construction in San Antonio, Texas, has several thousand dollars of medical debt from an emergency room visit for what she thought was a bad headache but turned out to be a tooth infection.

“They’ll treat you, but the bills are crazy,” she said. Gonzales said she’s tried to avoid seeking medical treatment because of the costs.

Relatively few Americans say they’re very or extremely confident that they could pay an unexpected medical expense (26%) or have enough money for retirement (18%). Only about one-third are extremely or very confident their current financial situation will allow them to keep up with expenses, though an additional 42% say they’re somewhat confident.

“I’ve been looking forward to retirement my entire life. Recently I realized it’s just not going to happen,” said Shapiro, of Pittsburgh, adding that his wife’s $30,000 or so of student debt is a financial factor for his household. The couple had hoped to sell their house and move this past year but decided instead to hold on to their mortgage rate of 3.4%, rather than facing a higher rate. ( The current average long-term mortgage rate reached 7.79% this month. )

About 3 in 10 Americans say they’ve foregone a major purchase because of higher interest rates in the last year. Nearly 1 in 4 U.S. adults have student debt, with the pandemic-era payment pause on federal loans ending this month, contributing to the crunch.

Will Clouse, 77, of Westlake, Ohio, said inflation is his biggest concern, as he lives on a fixed income in his retirement.

“A box of movie candy — Sno-Caps — that used to cost 99 cents is now a dollar fifty at the grocery store,” he said. “That’s a 50% increase in price. Somebody’s taking advantage of somebody.”

Americans are generally split on whether the Republicans (29%) or the Democrats (25%) are better suited to handle the issue of inflation in the U.S. Three in 10 say they trust neither party to address it.

Geri Putnam, 85, of Thomson, Georgia, said she’s been following the ongoing auto strikes with sympathy for the workers’ asks.

“I don’t think it’s out of line, what they’re asking for when you see what CEOs are making,” she said. “I think things have gotten out of control. When you can walk into a store and see the next day, across the board, a dollar increase — that’s a little strange. I understand supply and demand, the cost of shipping, et cetera. But it seems to me everyone’s looking at their bottom lines.”

Putnam also said she sees her six children struggling financially more than her generation did.

“They all have jobs and have never been without them,” she said. “They’re achievers, but I think at least two or three of them will never be able to buy a home.”

A slight majority of all Americans polled (54%) describe their household’s financial situation as good, which is about the same as it’s been for the last year but down from 63% in March of 2022. Older Americans are much more confident in their current finances than younger Americans. Just 39% of 18- to 29-year-olds describe their household finances as good, compared to a majority (58%) of those who are 30 and older. People with higher levels of education or higher household incomes are more likely than Americans overall to evaluate their finances as solid.

About three-quarters of Americans describe the nation’s economy as poor, which is in line with measurements from early last year.

Among those who are retired, 3 in 10 say they are highly confident that there’s enough saved for their retirement, about 4 in 10 are somewhat confident, and 31% are not very confident or not confident at all.

Clouse, of Ohio, said the majority of his money had gone towards caring for his wife for the past several years, as she’d been ill. When she passed away this past year, his household lost her Social Security and pension contributions. He sees the political turmoil between Republicans and Democrats as harming the economy but remains most frustrated by higher prices at the supermarket.

“Grocery products going up by 20, 30, 40%. There’s no call for that, other than the grocery market people making more money,” he said. “They’re ripping off the consumer. I wish Mr. Biden would do something about that.”

About 4 in 10 Americans (38%) approve of how Biden is handling the presidency, while 61% disapprove. His overall approval numbers have remained at a steady low for the last several years. Most Americans generally disapprove of how he’s handling the federal budget (68% disapprove), the economy (67%), and student debt (58%).


The poll of 1,163 adults was conducted Oct. 5-9, 2023, using a sample drawn from NORC’s probability-based AmeriSpeak Panel, designed to represent the U.S. population. The margin of sampling error for all respondents is plus or minus 3.9 percentage points.

 US gross domestic product (GDP) soared to a high 4.9% annualized rate in the third quarter fueled by strong consumer and government spending, according to the latest advanced estimate released by the Bureau of Economic Analysis (BEA) today (Oct. 26). That’s the highest since the end of 2021 and a big uptick from 2.1% in the previous quarter.

Perhaps Taylor Swift, Beyonce, and Barbenheimer's “inflation” had something to do with the $8.5 billion addition to the third quarter economy—half the GDP growth was driven by consumer spending.

Ivanna Hampton: The resilient U.S. economy in the third quarter blew past expectations. The gross domestic product, or GDP, grew faster than expected. Consumer spending powered forward despite tighter financial conditions. What does the data mean for the upcoming quarters? Morningstar Research Services senior U.S. economist Preston Caldwell is joining me to share his outlook. Thanks for being here, Preston.

Preston Caldwell: Thanks for having me, Ivanna.

Hampton: So the third quarter’s growth surged higher than the second quarter. What drove the increase last quarter?

Caldwell: Yeah, so U.S. real GDP grew by 4.9% annualized in the third quarter compared to 2.1% in the second quarter. So that’s a 2.8-percentage-point acceleration. The bulk of that increase was driven by consumption growth, which accelerated to 4% in the third quarter in annualized terms compared to 0.8% in the second quarter. We also had a large contribution from inventory accumulation, which added alone 1.3 percentage points of the acceleration in GDP growth. So one thing to keep in mind is that inventories, for one, are very volatile. They go up one quarter and then down the next. And so it’s virtually certain that we’re not going to continue to have a 1.3% contribution from inventories for the next several quarters. And consumption growth can be quite volatile as well, especially over the last year or so. Last year we saw a weak holiday season, which depressed the consumption growth rate in the fourth quarter of last year. So it’s very possible we’ll see that again this year.

Hampton: Now GDP growth of 4.9% was the fastest since 2021. Does this mean the economy’s growth rate has accelerated?

Caldwell: So when we try to gauge the underlying trend in the economy’s growth rate, we don’t want to pay too much attention to the quarter-over-quarter number. For one, these numbers are quoted in annualized terms. So I’m going to get into something a bit wonky here, but it’s important if you read these reports, so bear with me.

So, when we annualized these GDP growth numbers, we’re effectively approximately multiplying them by four. So what really happened was GDP grew by 0.5% in quarter-over-quarter terms in the second quarter of this year, and that bumped up to 1.2% in the third quarter. We approximately multiply that by four, and that’s how you get the 4.9% annualized growth rate that’s quoted in the media. So, the point being is that these fluctuations are not quite as large as the annualized numbers would give you if you don’t understand what that number means. And so we look a lot in order to smooth things out at a year-over-year growth rate. And so that year-over-year growth rate in real GDP was 2.9% in the third quarter, which was an acceleration from the 2.4% in the prior quarter as well as the 1.9% for the full year 2022, but not as dramatic as the 4.9% number would suggest.

Hampton: Well, Preston, what do you expect for the U.S. economy in the fourth quarter and in 2024?

Caldwell: We’re expecting, actually, GDP growth to come back to normal in the fourth quarter and then continue to slow after that, eventually getting below 1% on a quarter-over-quarter annualized basis in the middle quarters of 2024. And that’s because, for one, the effects of the Fed’s rate hikes, the largest rate hikes in 40 years, have yet to fully play out. For example, bank credit is still in the process of contracting and that will slow spending in terms of business investment and parts of consumer spending and other areas. And there’s plenty of what we might call “known unknowns” in terms of the potential effects of rate hikes, that we know are out there, but we don’t know exactly where they are. We just know something’s going to pop up in terms of vulnerabilities in the economy. And also I think households will get more conservative in their spending as excess savings deplete, which will weigh on consumption growth over the next year or so.

Hampton: Now, how does this data fit into your thinking about the outlook for the Fed’s policy?

Caldwell: I don’t think the Fed is going to react too greatly to today’s news. They’re going to put it in the kind of context in which I’ve just delivered, which is to say the underlying trend in growth may be accelerating a bit, but not dramatically. But what’s more important for the Fed is that core inflation is coming down. Core inflation as measured by the PCE inflation rate, which was issued today, was 2.4% in quarter-over-quarter annualized terms in the third quarter. So that’s almost back to the Fed’s 2% target. So if that holds up, then the Fed’s job of combating inflation is just about wrapped up. In fact, if the battle against inflation is won and GDP growth weakens as I expect next year, then the Fed will respond to that by starting to cut interest rates aggressively, which is what I expect.

Hampton: And we’ll hear from the Fed next week. Thank you, Preston, for your time today.

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