Breaking: US GDP expands 4.3% in Q3 vs. 3.3% forecast
The United States' (US) Gross Domestic Product (GDP) expanded at an annual rate of 4.3% in the third quarter, the US Bureau of Economic Analysis (BEA) reported in its initial estimate on Tuesday. This reading followed the 3.8% growth recorded in the second quarter and came in better than the market expectation of 3.3%.
Other details of the report showed that the core Personal Consumption Expenditures (PCE) Price Index rose by 2.9% on a quarterly basis, matching analysts' estimates. In this period, the Gross Domestic Product Price Index was up 3.7%, compared to the market forecast of 2.7%.
"Compared to the second quarter, the acceleration in real GDP in the third quarter reflected a smaller decrease in investment, an acceleration in consumer spending, and upturns in exports and government spending. Imports decreased less in the third quarter," the BEA explained in its press release.
Market reaction to US GDP data
The US Dollar Index (DXY) recovered slightly from session lows following the GDP data. At the time of press, the USD Index was down 0.25% on the day at 98.00.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.54% | -0.86% | -0.92% | -0.71% | -1.26% | -1.59% | -0.75% | |
| EUR | 0.54% | -0.31% | -0.41% | -0.16% | -0.72% | -1.05% | -0.21% | |
| GBP | 0.86% | 0.31% | 0.00% | 0.15% | -0.41% | -0.74% | 0.11% | |
| JPY | 0.92% | 0.41% | 0.00% | 0.23% | -0.30% | -0.64% | 0.07% | |
| CAD | 0.71% | 0.16% | -0.15% | -0.23% | -0.46% | -0.86% | -0.03% | |
| AUD | 1.26% | 0.72% | 0.41% | 0.30% | 0.46% | -0.03% | 0.52% | |
| NZD | 1.59% | 1.05% | 0.74% | 0.64% | 0.86% | 0.03% | 0.86% | |
| CHF | 0.75% | 0.21% | -0.11% | -0.07% | 0.03% | -0.52% | -0.86% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the third-quarter US Gross Domestic Product (GDP) data at 05:00 GMT.
- The US Gross Domestic Product is expected to have expanded at an annualised rate of 3.3% in Q3.
- Market players will also pay attention to the GDP Price Index and its potential impact on Fed’s decision.
- The US Dollar Index heads into the release with a clear bearish tone.
The United States (US) Bureau of Economic Analysis (BEA) will publish the first preliminary estimate of the third-quarter Gross Domestic Product (GDP) on Tuesday, at 13:30 GMT. Analysts expect the data to show annualized growth of 3.3%, following the 3.8% expansion in the previous quarter.
Markets expect solid GDP expansion to continue in the three months to September
Growth in the US seems to have picked up pace after contracting by 0.5% in the three months to March, and the expected 3.3% reading, despite being below the previous one, should indicate healthy economic progress. And, in fact, growth in the US does not seem to be a problem these days. Rather than that, the focus is on a weak labor market. It’s also on the Federal Reserve (Fed) and the future of monetary policy, which is clearly related to the tepid employment situation.
Alongside the GDP headline, the BLS will release the GDP Price Index – also known as the GDP deflator – which measures inflation across all domestically produced goods and services, including exports but excluding imports. The index stood at 2.1% in Q2, a quite encouraging level given the 3.8% posted at the beginning of the year.
Also, it is worth noting that the Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 3.5%, according to the latest estimate. The figure is not an official forecast, but as the Atlanta Fed site notes, it serves “as a running estimate of real GDP growth based on available economic data for the current measured quarter.”
There is, however, a caveat: solid employment creation throughout Q2 largely contributed to stable consumption levels. That would not be the case in Q3, as the labor market has loosened beyond levels the Fed would consider comfortable. The Unemployment Rate rose to 4.6% in November, according to the latest Nonfarm Payrolls (NFP) report, exceeding expectations of 4.4%. Job creation in the same month accounted for 64K, yet previous months’ readings were downwardly revised, meaning employment in August and September combined is 33,000 lower than previously reported. October data is missing due to the government shutdown, which clearly worsened the employment situation.
So, on the one hand, watching forecasts and the Atlanta Fed GDPNow model, it seems GDP would result above 3%. A worsened labor market, on the other hand, can take that number way down.
When will the Gross Domestic Product print be released, and how can it affect the US Dollar Index?
As previously noted, the US GDP report is due at 13:30 GMT on Tuesday, and is expected to impact the US Dollar (USD). The market reaction could be overstretched given the ongoing winter holidays and the reduced trading volumes that typically accompany them.
Given the broad USD weakness, a negative reading is likely to have a wider impact on the American currency and send it further south. A better-than-anticipated figure, on the contrary, could bring some air to USD bulls, yet it is unlikely to change its predominant bearish trend.
Valeria Bednarik, FXStreet Chief Analyst, notes: “The US Dollar Index (DXY) hovers around 98.30 ahead of the announcement, not far above its December low at 97.87. From a technical standpoint, the DXY is bearish. In the daily chart, a flat 100 Simple Moving Average (SMA) at around 98.60 attracts selling interest, containing advances. In the same chart, a bearish 20 SMA accelerates its slide above the larger one, reflecting mounting selling pressure. Finally, the same chart shows that technical indicators maintain downward slopes within negative levels, in line with lower lows ahead.”
Bednarik adds: “A poor GDP reading could push the DXY towards the mentioned monthly low, with additional slides exposing 97.46, the intraday low from September 30. Further declines should see the index nearing the 97.00 threshold, where the decline is likely to decelerate. Friday’s high at 98.42 provides immediate resistance ahead of the 100-day SMA at 98.60. Once above the latter, 99.00 comes as the next barrier.”
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Author
FXStreet Team
FXStreet
