Title: US Economy Shows Resilience with Faster-than-Expected Third Quarter Growth
Date: [Current Date]
The US economy has demonstrated remarkable resilience in the face of high interest rates, expanding at its fastest pace in nearly two years during the third quarter. According to preliminary figures from the Bureau of Economic Analysis, the nation’s gross domestic product (GDP) grew by 4.9 percent on an annualized basis, surpassing economists’ expectations.
Consumer spending emerged as the main driver of this robust growth, with a 4 percent increase compared to the previous quarter’s meager 0.8 percent rise. Both goods and service sectors experienced solid growth, showcasing the underlying strength of the consumer supported by a strong labor market.
Economists, while acknowledging the likelihood of slower growth in the future, emphasize that the overall outlook remains positive. Eric Winograd, director of developed market economic research at AllianceBernstein, affirms that as long as the consumer remains strong, the economy as a whole will thrive.
However, the surge in business spending on inventories, which is typically volatile, played a significant role in bolstering third-quarter growth. Experts suggest that this boost is expected to unwind in the fourth quarter, particularly with the resumption of student loan payments as the repayment moratorium ended.
As the Federal Reserve prepares for its upcoming meeting, the third-quarter GDP figures are not expected to greatly influence their decision on interest rates. The central bank aims to guide inflation back to its 2 percent target without causing a sharp decline in the economy. Instead, the meeting will discuss the impacts of previous rate increases and recent events, such as the bond market sell-off.
The growth data, however, reinforce the long-term strength of the economy and support the expectation that rates will remain elevated for an extended period. Long-dated Treasury bonds, particularly the 10- and 30-year bonds that have experienced significant sell-offs in recent weeks, are sensitive to growth expectations.
While the initial market reaction to the GDP data was relatively subdued, with Treasury yields experiencing slight dips and the stock market futures showing a slight uptick, the GDP figures can have broader implications. Strong headline GDP figures can influence consumer and business sentiment, impacting behavior and inflation expectations.
Certain sectors of the economy, such as the property sector, have been negatively affected by the increase in interest rates. Sales of existing homes fell to their slowest pace in 13 years in September due to rising mortgage rates. However, consumer spending has proven more resilient than anticipated, thanks to rising wages and declining inflation.
These figures are based on preliminary data, with the Bureau of Economic Analysis set to release a second estimate later next month, followed by a third figure in December.