Shrugging off larger rates of interest, America’s shoppers spent sufficient to assist drive the economic system to a brisk 5.2% annual tempo from July by way of September, the federal government reported Wednesday in an improve from its earlier estimate.
The federal government had previously estimated that the economic system grew at a 4.9% annual fee final quarter.
Wednesday’s second estimate of progress for the July-September quarter confirmed that the economic system sharply accelerated from its 2.1% rate from April through June. It confirmed that the U.S. gross home product — the overall output of products and companies — grew at its quickest quarterly fee in almost two years.
Shopper spending, the lifeblood of the economic system, rose at a 3.6% annual fee from July by way of September — nonetheless wholesome however a downgrade from the earlier estimate of 4%. The economic system additionally obtained a raise from corporations constructing inventories in anticipation of future gross sales. Additionally driving the third quarter progress was an uptick in spending and funding by governments in any respect ranges, federal, state and native.
“The revision to Real GDP during the third quarter of the year showed a goldilocks scenario for the Federal Reserve (Fed) of stronger real economic growth with reduced pricing pressures,” Raymond James Chief Economist Eugenio Aleman stated in a notice. ” Maybe this was the explanation why a number of Fed audio system have been comparatively dovish these days and can most likely cement the market’s conviction that the Fed is completed growing rates of interest this cycle. “This is good news for the economy and for the markets.”
The U.S. economic system, the world’s largest, has proved resilient even because the Federal Reserve has raised its benchmark interest rate 11 times since March 2022 to battle the worst bout of inflation in 4 a long time. These larger rates of interest have considerably elevated client and enterprise borrowing prices. However they’ve additionally helped ease inflationary pressures: Consumer prices rose 3.2% last month from 12 months earlier, a marked enchancment from the 9.1% year-over-year inflation recorded in June 2022.
The U.S. job market is cooling from the red-hot ranges of the previous two years. But it surely’s nonetheless wholesome by historic requirements: Employers are adding an average of 239,000 jobs a month this year. And the unemployment fee has are available under 4% for 21 straight months, the longest such streak because the Nineteen Sixties.
The mixture of easing inflation and resilient hiring has raised hopes the Fed can handle a so-called comfortable touchdown — elevating charges simply sufficient to chill the economic system and tame worth will increase with out tipping the economic system into recession.
