Goldman Sachs: US third-quarter growth beats expectations; Goldman Sachs expects cooling consumption to slow the fourth quarter

Why did third-quarter growth beat expectations?

US real GDP grew at an annualized quarter-on-quarter rate of 3.4% in the third quarter, above the median market forecast of 3.2% and Goldman Sachs’ forecast of 3.3%, and faster than the second quarter’s 2.2%. Personal consumption grew at an annualized quarter-on-quarter rate of 3.8%, above the 3.4% expected by both the market and Goldman Sachs.
Nonresidential fixed investment grew at an annualized quarter-on-quarter rate of 12.7%, with investment in information processing equipment and industrial equipment related to AI development rising 37.4% and 24.7%, respectively.
Some components also weighed on growth: residential investment fell 3.3%; inventory accumulation added 1.6 percentage points to GDP growth, while net exports subtracted 3.3 percentage points, reflecting increased imports and falling exports.

Consumption has remained resilient this year despite rising energy prices; earlier annual revisions to the national accounts raised income and the saving rate, also leading Goldman Sachs to view the consumption outlook as healthier. But the bank expects consumption growth to converge with real income growth as the boost from fiscal stimulus earlier in the year fully fades.
The latest monthly data already show signs of slowing: nominal personal spending rose 0.5% month on month in September, but real spending was flat, as a 0.2% rise in services spending was offset by a 0.3% decline in goods spending.
The saving rate fell 0.2 percentage points in September to 3.8%, slightly below Goldman Sachs’ model estimate based on strong balance sheets and low unemployment. The bank expects the saving rate to rise modestly to 4.2% by the end of 2027.

The core PCE price index rose 0.32% month on month in September, in line with expectations; it rose 3.12% year on year, above the previous month’s 3.0%. Goldman Sachs estimates that the Dallas Fed’s trimmed mean PCE, which excludes extreme price changes, rose 0.23% month on month and 2.27% year on year.
Goldman Sachs considers the trimmed mean a better indicator of underlying inflation trends because some of the price changes currently excluded largely reflect one-off effects from tariffs, energy shocks, AI-related price pressures and statistical measurement distortions.
In the week ending 24 October, initial jobless claims fell by 1000 to 194 thousand; the four-week average fell to 197 thousand, its lowest level since 1969.

Goldman Sachs’ initial fourth-quarter GDP tracking estimate is for annualized quarter-on-quarter growth of 1.8%, slowing from 3.4% in the third quarter. In its forecast, personal consumption growth falls to 1.8% and residential investment declines 5.0%.
Business fixed investment remains a support: Goldman Sachs expects it to grow 8.2% in the fourth quarter, driven by AI-related investment.