The delayed US third-quarter GDP report has come in at an eye-popping 4.3% annualised rate, a full percentage point above the consensus expectation. This was primarily due to a strong performance from net trade with exports rising 8.8% and imports falling 4.7%. This means that net trade contributed 1.6pp of the 4.3% headline growth rate. Other than that, consumer spending grew a robust 3.5% versus the 2.7% rate expected. Non-residential fixed investment was a little softer at 2.8%, while residential investment fell 5.1% for a second consecutive quarter. Rounding it out, government spending grew 2.2% while inventories subtracted 0.22pp.
So a fantastic outcome, but fourth-quarter GDP is likely to record growth that is considerably slower, thanks in part to the effects of the month-long government shutdown. We also can’t see the net trade component continuing to make such a strong contribution while consumer spending is also set to slow. Expectations of cooling data probably explains the relatively muted market reaction with the 10Y Treasury yield only up 3bp on the day and Fed funds rate cut expectations for 2026 still holding above 50bp.