America’s 3.4% Boom and the Cost of Waiting
A data centre can contribute to economic growth years before its investors receive an adequate return. A household’s bills fall due every month.
That difference in timing is becoming central to understanding the American economy.
The third-quarter GDP report shows an economy capable of financing substantial investment and sustaining demand. It also raises a harder question: how widely, and how quickly, will the benefits reach the people and businesses carrying the costs?
My reading is that America’s main vulnerability lies in the gap between the immediate demands of building its next economic model and the eventual income that model must generate.
The advance estimate puts real GDP growth at 3.4% annualised in the third quarter, following 2.2% in the second. That translates into approximately 0.84% growth over the preceding three months. Private domestic final demand increased at a 4.9% annualised rate.
Those are meaningful signs of strength.
Consumer spending expanded at 3.8% annualised. Business investment excluding housing rose 12.7%, with information-processing equipment particularly strong. Residential investment, however, contracted 3.3%.
The contrast matters. America is simultaneously expanding productive capacity in some areas and struggling to sustain investment in others.
It also matters how we interpret the accounting.
Reuters reports that inventory rebuilding contributed 1.61 percentage points to quarterly growth, while imports subtracted 2.64 points. These figures help explain the headline, but they cannot be treated as independent estimates of what the economy would have done without inventories or trade.
Imported equipment can appear first as investment expenditure. Imports are then subtracted to exclude foreign production. The same principle applies to imported goods held in inventories.
An imported server can therefore support the expansion of an American business without its entire purchase price representing American production.