U.S. economy surprises with 4.3% growth in Q3…Can it withstand shutdown headwinds in Q4?

This year in Q3 the U.S. economy showed a surprise 4.3% growth. Consumption increased sharply. However, prospects indicate that growth may slow in Q4 due to the U.S. federal government shutdown (temporary work stoppage).

The U.S. Department of Commerce said on the 23rd that the U.S. gross domestic product (GDP) growth rate for Q3 (advance estimate) was 4.3% (annualized quarter-over-quarter). This figure is more than 1% percentage point higher than the experts' forecast (3.2%) surveyed by Dow Jones/The Wall Street Journal.

Earlier, Q1 GDP contracted by -0.6% before rebounding strongly to 3.8% in Q2. In Q1, moves by the Trump administration to impose tariffs led U.S. firms to temporarily and sharply increase imports to build inventories, which pulled down GDP.

Analysts say U.S. economic growth was driven by consumer spending. "Real final sales to private domestic purchasers" (the sum of consumer spending and private fixed investment), which accounts for more than two-thirds of GDP, increased 3.0% in Q3. That is higher than Q2's 2.9% increase. The Commerce Department explained that "a smaller drop in investment and a recovery in government spending also contributed to Q3 growth."

Some analysts also say the advance estimate is likely to change. This is because the recent 43-day shutdown severely damaged U.S. statistical infrastructure. Countries like the U.S. normally aggregate thousands of detailed data points to calculate GDP.

But during October the U.S. Labor Department and Census Bureau halted almost all data collection activities. The advance estimate is reported to include a much higher-than-usual proportion of substitute values and model estimates. The finalized Q3 GDP figure will be released on the 22nd of next month.

The prevailing view is that U.S. growth will fall below 4% in Q4 because the shutdown has had a direct downward effect on the real economy. According to the U.S. Congressional Budget Office (CBO), the shutdown reduces the Q4 GDP growth rate by an annualized 1.0~2.0% percentage points.

The U.S. Treasury also said the shutdown could pull down U.S. economic growth. However, some analyses expect a rebound in Q1 next year as, since the shutdown ended on the 12th of last month, the government has been executing delayed spending such as paying civil servants' wages.

The U.S. government expects annual GDP growth this year to be around 3%. In a recent interview with CNBC, U.S. Treasury official Scott Bessent said of the U.S. economy, "It's better than we expected," and added, "Despite the shutdown, this year's GDP growth will finish at 3%."

Reporter Kim Joo-wan kjwan@hankyung.com