US Third Quarter Military Buildup and Wealthy-Reliant Growth 'Bubble Turn', Resembling Lee Jae-myung Regime

US Third Quarter Military Buildup and Wealthy-Reliant Growth 'Bubble Turn', Resembling Lee Jae-myung Regime

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A significant portion of US growth in the third quarter stemmed from military spending, while corporate investment, spurred by the development of AI systems, has noticeably cooled, signaling a "bubble turn" boom.

President Lee Jae-myung announced an "economic recovery" starting in the third quarter, echoing the US's "military buildup and economic growth dependent on the wealthy." Korean media outlets reported this as "surprising US third-quarter growth driven by consumption."

US corporate gross profits rose by $166 billion in the third quarter, a significant increase compared to the $6.8 billion increase in the previous quarter. However, after adjusting for taxes and inflation, disposable personal income remained unchanged, indicating an economic system reliant on the wealthy.

In its analysis of third-quarter indicators, the New York Times stated on the 23rd that "this was a sign of persistent price increases eroding purchasing power," and that "the third-quarter data still contains significant noise, with most of the growth coming from wealthy households."

In the third quarter, low-income families in the United States grappled with slowing wage growth and rising prices for a variety of household goods, including beef, coffee, and furniture.

Conversely, despite some large corporations announcing workforce cuts, the limited scope of overall layoffs still supported investment activity.

The New York Times reported, "Much of the consumer spending growth came from wealthier and upper-middle-class Americans, who continued to pay for travel, leisure, restaurants, and other modest purchases." "Several skeptical financial analysts fear the third-quarter boom could turn into a bubble," which helped bolster the broader stock market rally.

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According to an analysis by Principal Asset Management, "AI spending contributed nearly half of the year-over-year GDP growth in the first half of this year." The New York Times reported, "Most analysts expect this investment to continue.

However, third-quarter data suggests the slowdown may be stronger than some expected, with intellectual property investment slowing compared to previous months. Other recent figures also show a decline in durable goods orders in October, a slowdown despite the massive data center construction underway in the third quarter."

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The US benchmark S&P 500 index has risen about 17% this year, and the tech-heavy Nasdaq has risen more than 20%, reflecting the AI boom.

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The New York Times reported, "The consensus among experts is that growth will be positive in the fourth quarter and through 2026, but likely less robust than the pace seen in the third quarter. Most major bank research teams expect growth to slow in the fourth quarter and remain around 2% in the new year."

Michael Pierce, chief U.S. economist at Oxford Economics, said, “While growth remains robust, the potential rate of growth has slowed as net immigration has fallen sharply.” He added, “The economy is generally strong, but there is still a lot of noise in the third-quarter data, and most of the strength is coming from wealthy households.”

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An initial estimate of fourth-quarter GDP growth is expected in late January or February.

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“For now, the employment numbers show a slowdown to the low levels associated with recessions like the early 2010s,” the Times said. “More broadly, persistent concerns about high costs could headwind consumer confidence and curb new spending. Electricity prices are rising, and millions of families are expected to see their health insurance premiums rise further when insurance subsidies expire at the end of the year.”

The New York Times continued, “In a large and wealthy country like the United States, the top 20% number well over 60 million people, more than the entire population of many major countries.”

It added, “Bank balances tracked by large institutions show that wealthier Americans are helping to drive up indicators of economic worth, but anxiety about the financial burden persists.” Bank of America’s October report, “Consumer Checkpoint: A Tale of Two Wallets,” stated, “Consumer spending has increased, but the gap between low-income and high-income households remains stark.” A report analyzed by five economists stated, "According to BOK aggregate card data, total credit and debit card spending per household increased by 2.0% year-over-year in September, up from 1.7% in August, and seasonally adjusted (SA) household spending growth increased by 0.2% month-on-month, marking the fourth consecutive month of increase."

The report continued, "While low-income households have seen some recovery in consumption, their growth rate remains slower than that of the middle- and high-income groups, likely due to weaker wage growth for this group." The report continued, "While middle- and high-income households have seen higher wage growth, their spending is also likely to benefit from the wealth they generate."

The report also stated, "Discretionary spending by the top 5% of households by income tends to expand more broadly than that of the middle class when the S&P 500 rises." Commenting on the third-quarter US GDP report, Jared Bernstein, former chairman of President Biden's Council of Economic Advisers, described himself in an email as a "hard-nosed veteran" of analyzing the gap between strong GDP and the "bad economic mood" among American households. "But the current gap between the underlying economy and how people feel about it is uniquely wide," he wrote of the widening economic gap between "GDP growth and a bad economy."

The third-quarter US data showed that even as tariffs raised prices on some goods, consumers continued to spend, with consumption accounting for about 70% of the economic pie in its normal year and rising at a 3.5% annual rate in the third quarter. In an article analyzing U.S. third-quarter consumer data, the New York Times reported, "Tariffs, a government shutdown, rising unemployment, and persistent inflation have all added to the stress on the U.S. economy." "Mastercard's annual holiday spending data analysis report, SpendingPulse, found that shoppers spent 3.9% more between November 1 and December 21 this year than last year."

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The report stated, "Consumers are visiting stores and restaurants despite rising holiday prices, comparing in-store and online prices and seeking value by purchasing discounted items. These results reflect the mindset of American consumers as they navigate an uncertain economy."

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The New York Times added, "While Americans face rising groceries, childcare, and rent costs due to slowing job growth, many are still opening their wallets to purchase holiday gifts and items on their wish lists. Some are doing this by delaying bill payments. Half of consumers have planned 'buy now, pay later' plans to finance their holiday purchases." "There are still some consumers who are a little nervous," Michelle Meyer, chief economist at Mastercard's Economics Institute, told the New York Times. "Consumers will have to choose where they can find alternative options, bigger discounts, and the best value, and that relationship will continue through 2026."

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President Lee Jae-myung stated on the 3rd, "The worst thing is rising prices amidst a recession. Now, the economy is recovering rapidly, so some upward pressure on prices is appearing." He added, "The final growth rate for this year is projected to be around 1%, but the second half of the year is showing a sharp recovery in the upper 1% range. This process is creating some upward pressure on prices. While the overall inflation rate is around 2.1%, it's difficult to say that inflation is high, but the public's perception of inflation may differ."

In a special statement commemorating the first anniversary of the "Revolution of Light," President Lee responded to a question about the economic outlook by stating, "The recovery is faster than I expected. Not only the growth rate, but also the capital market and various sentiment indices are improving." He added, "It will take some more time, but we are definitely at a turning point."

​South Korea's price statistics are always 20-30% lower than the US Consumer Price Index (CPI) because they exclude the cost of owning a home. This has become a means of controlling wage increases for urban workers due to heavy industrialization in imitation of the US system. During the Moon Jae-in administration, a small number of the Bank of Korea's Monetary Policy Committee members raised this issue, but it was left for research review and left as is.

Yonhap News reported on the 23rd, "US Economy Surprises 4.3% Growth in Q3... Strong Consumption Drives Growth (Comprehensive)".

The Hankyoreh reported on the 24th, "US Q3 Growth Rate 4.3%... Surprising Growth Exceeding Expectations."

​The Korea Economic Daily also reported on the 24th, "US Q3 GDP Surprises 4.3% Growth... Strong Consumption Drives Growth."

​Chosun Biz reported on the 24th under the headline, "US Q3 GDP 'Surprises 4.3% Growth'" that, "Contrary to concerns that tariffs and a slowdown in employment would dampen consumption, personal consumption held up, and increased exports and decreased imports also boosted growth." The article continued, "Private investment fell 0.3%, remaining flat. This is interpreted as a calming of the trend in the third quarter after a sharp rise in the first quarter due to the expansion of inventory ahead of tariff implementation and a sharp decline in the second quarter."