The United States economy has once again outperformed expectations, posting a 3.2% growth rate in the third quarter despite persistent inflation and high interest rates. The figure, released by the Bureau of Economic Analysis on Thursday, surpassed analysts’ forecasts of 2.8% and marks the ninth consecutive quarter of above-trend expansion.
Consumer spending, which accounts for roughly two-thirds of US economic activity, rose by 4.3% annualised, driven by a robust labour market and accumulated savings. Unemployment remained below 4% for the 30th month, a feat not seen since the 1960s. Business investment in equipment and software also contributed, increasing by 5.1%.
The resilience has defied predictions of a recession from several prominent forecasters, including the International Monetary Fund and a consensus of Wall Street economists. A year ago, many expected the Federal Reserve’s aggressive tightening cycle to trigger a downturn. Instead, the economy has absorbed 525 basis points of rate increases with only a controlled slowdown.
In London, the Treasury has taken note. Chancellor of the Exchequer Jeremy Hunt has ordered a review of US economic policies to identify lessons for British growth. The study, led by the Office for Budget Responsibility, will examine factors such as the US federal fiscal stance, labour market flexibility, and energy independence.
“The American economy continues to demonstrate a dynamism that we would do well to learn from,” Hunt said at a Treasury press conference. “While our challenges are different, there are structural elements worth examining: a more flexible labour market, a deeper capital market, and a regulatory environment that encourages innovation.”
The review comes as Britain’s own economic recovery remains fragile. GDP growth in the third quarter was 0.3%, below the US rate and the eurozone average. The Bank of England has held rates at 5.25% since August, but inflation, at 4.6%, remains more than double the 2% target.
Critics argue that the US model is not directly transferable. British labour productivity has lagged US levels by 18 percentage points since 2010, a gap the Treasury has struggled to close. The US benefits from abundant domestic energy resources and a larger, more integrated single market.
“The British economy is not simply the American economy in miniature,” said Michael Saunders, a former Bank of England policymaker. “The structure of our industry, our fiscal rules, and our relationship with Europe mean that we cannot import American solutions wholesale. But we can take inspiration.”
The review is expected to report by the spring. It will include recommendations on tax incentives for investment, deregulation of the planning system, and greater support for research and development. Hunt has indicated he will take a “pro-business” stance in his forthcoming Budget, with measures aimed at boosting capital formation and labour supply.
For now, the US outperformance continues. The Federal Reserve is widely expected to hold rates steady at its December meeting, with markets pricing in the first cut in the second half of next year. The economy, it seems, has found a new equilibrium.
