4.9%. While investment spending fluctuated with rising interest rates, personal consumption remained robust and was the primary driver of economic growth in 2023. Personal consumption accounts for approximately two-thirds of GDP, and personal consumption has been the key, consistent, driver of economic growth during the economic recovery, contributing positively to GDP growth since the third quarter of 2020.
Contributions to Percent Change in Real Gross Domestic Product – Annualized Rate (Source: Bureau of Economic Analysis) 2022 Q3 2022 Q4 2023 Q1 2023 Q2
2023 Q3
GDP
2.7
2.6
2.2
2.1
4.9
Personal Consumption
1.05 -0.18 1.23 -1.45 -0.79 0.62 -1.41 -0.66 0.49 2.58
0.79 -0.01 0.80 0.62 -0.99 0.24 -1.23 1.61 0.90 0.26
2.54 1.14 1.40 -1.69 0.53 0.76 -0.22 -2.22 0.82 0.58
0.55 0.11 0.44 0.90 0.90 0.98 -0.09 0.00 0.57 0.04
2.69 1.08 1.62 1.47 0.15 0.00 0.15 1.32 0.79 -0.08
Goods
Services
Investment
Fixed Investment
Nonresidential Investment Residential Investment
Inventories
Government Spending
Net Exports
Fueling the growth in personal consumption has been an extremely strong labor market combined with a decline in the personal savings rate. The chart below shows real consumer spending (consumer spending adjusted for inflation) and the personal savings rate for the 12 months ended September 2023. Real personal consumption expenditures are indicated by the blue line (left axis); the personal savings rate is indicated by the red line (right axis). After dipping slightly at the end of 2022, real consumer spending increased approximately 2.5% between December 2022 and September 2023, with monthly increases occurring between April and September. In other words, consumers weren’t just spending more because prices were higher, they were buying more stuff. After peaking at 5.3% in July, the personal savings rate declined significantly to only 3.4% in September. Real Consumer Spending (blue line) and Personal Savings Rate (red line) Sept. 2022 – Sept. 2023 (Source: Federal Reserve Economic Database)
2
Center for Business and Economic Insight
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