The third-quarter US economic growth was robust despite being somewhat lower than previously estimated, highlighting the country’s economic strength over the summer.
The Commerce Department released a report on Thursday that stated that from July through September, the gross domestic product—the most comprehensive indicator of economic output—grew at an annualized rate of 4.9%. Compared to the 5.2% increase shown in the second estimate, that is a slower rate of growth.
The third quarter had the most growth in almost two years as Americans spent their money on products, movies, and live performances. Although the US economy has cooled off from the scorching pace it set early in the year, consumption and hiring are still strong.
The agency revised government outlays and business investment upward while accounting for lower consumer spending, inventory investment, and exports in its final estimate. Approximately two thirds of the economy are produced by consumer expenditure, which was lowered down from 3.6% to 3.1%.
The Federal Reserve is expected to lower interest rates in a few months, as investors believe, despite recent denials from officials. A “soft landing,” in which inflation reaches the Fed’s target of 2% without a significant increase in unemployment, is another theory that some people hold about the state of the economy.
Interest rates will soon drop.
These days, rate reductions seem to be the talk of the town. Three rate cuts for 2019 have been scheduled by central bank officials, according to the Fed’s most recent set of economic estimates, which were made public earlier this month.
The Fed and investors are glad that inflation is declining once more in 2023 after a temporary increase earlier in the year. November saw a 3.1% increase in the highly watched Consumer Price Index from October’s 3.2% increase from a year earlier. The summer saw a strong increase in the CPI to 3.7% because of soaring energy expenses, which have since sharply decreased.
On Friday, the Commerce Department releases statistics for November that includes household income, spending, and the Fed’s preferred inflation measure.
The exact start date of rate reductions is unknown. Futures suggest that March may bring that first cut. However, Fed representatives have been attempting to sober up giddy markets.
John Williams, the president of the New York Fed, recently told CNBC, “We aren’t really talking about rate cuts.”
Austan Goolsbee, the president of the Chicago Fed, stated to CBS Sunday that “it’s an overstatement to be counting the chickens” and that inflation is still over target.
strong US economy for the time being
Although it has weakened since the summer, the overall economy has remained amazingly robust and hasn’t collapsed.
Some believe that the Fed’s efforts to further curb inflation may have been made more difficult by America’s robust economy. But after the summer, price increases cooled off even further.
The Atlanta Fed is now predicting that the GDP will expand by 2.7% in the fourth quarter, which is less than it did in the previous three months but still a respectable growth rate.
The US economy has been resilient in the face of interest rates that have not been this high in 22 years, which has stoked expectations that the Fed is about to accomplish a historically challenging goal: stifling inflation without driving up unemployment.
In a recent report, John Min, chief economist of Monex USA, stated that a “soft-landing” for the US economy seemed more likely next year.
There are still not many new applications for unemployment benefits, which usually provide early warning indicators of changes in the labor market. Although jobless claims increased slightly last week, they fell short of economists’ expectations.
In the week ending December 16, 205,000 initial claims were filed for unemployment insurance. The Labor Department said in a separate report on Thursday that this is an increase of 2,000 from the upwardly revised figure of 203,000 from the previous week.
Nevertheless, a number of financial obstacles remain. As Americans spend their pandemic savings, they keep accruing debt. After the pandemic-related hold expired this fall, over nine million Americans were not able to make their first student loan payment.
