Exponential behavior is when acceleration in X leads to further acceleration in X. Factories and starbases increase economic productivity, which increases the speed at which more factories and starbases can be built. This is exponential growth.

Duh.  

The major difference between Gal Civ II and III is that in II factories did NOT increase the productivity of a planet.  What factories did instead was they CONVERTED economic productivity from population into other forms like starships.

In contrast, in Gal Civ III factories and starbases directly INCREASE the productivity of a planet, leading to exponential feedback loops.  Building a factory on a planet increases the economic productivity of a planet, thereby increasing the rate at which you can build another factory.  In Gal Civ II you couldn't do this because you'd go bankrupt if your population wasn't large enough to support the production from the factories.  

Anyone who says this is not exponential growth isn't very good at math.