The U.S. economy’s third-quarter GDP growth has been revised up to a 5.2% annualized rate, compared to the previous estimate of 4.9%. The growth was driven by an increase in business investments and equipment accumulation, according to a report from the Commerce Department.
The robust growth, which was the fastest pace in nearly two years, suggests that the economy continued to grow despite fears of a recession. However, economists have noted that the expansion appears to be cooling as higher borrowing costs have curbed hiring and spending.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised lower to a 3.6% growth rate from the previously estimated 4.0%. This was attributed to cuts in outlays on financial services and insurance, as well as shortages caused by the recently ended United Auto Workers strike.
On the other hand, corporate profits increased by 4.3%, and the saving rate was raised to 4.0% from 3.8%. Despite the strong GDP growth, economic activity has shown signs of slowing at the start of the fourth quarter, as retail sales fell in October and job growth slowed in November.
The report also confirmed that inflation was trending lower, with slight downward revisions to measures watched by the Fed for monetary policy. With slowing demand, there is optimism that the U.S. central bank is likely done raising interest rates in this cycle, and markets are even anticipating a rate cut in mid-2024.
The news of the upwardly revised GDP growth rate has had a positive impact on stocks on Wall Street, with trading higher. However, the broader economic outlook suggests that the economy’s momentum is waning, with concerns about a potential slowdown in the near future.
Overall, while the recent GDP report has revealed strong growth in the third quarter, there are growing concerns about the sustainability of this trend as the economy potentially heads into a period of cooling growth.
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