Over the last three months, the US economy expanded at its quickest rate in almost two years, surprising forecasts for a downturn as many had anticipated that the Federal Reserve’s monetary tightening would limit American consumer spending.
The US economy grew at an annualised pace of 4.9% during the third quarter, according to the Bureau of Economic Analysis’s advance estimate of GDP for the quarter, which was faster than consensus projections. According to a Bloomberg poll of economists, the US economy expanded at an annualised rate of 4.5% over that time.
The GDP for the second quarter was reduced down to 2.1%, however the reading was higher.
The GDP report shows how resilient US consumers are in spite of persistent worries about a recession. However, a lot of experts believe that this is the peak of economic expansion before consumer spending and company development are stifled by the Federal Reserve’s tightening of credit and the recent increase in bond yields.
Greg Daco, the chief economist at EY, stated in a research note before the data was released on Thursday that “real GDP growth is likely to drift below trend for several quarters due to factors such as tighter credit conditions, the restart of student loan payments, uncertainty regarding the lagged impact of monetary policy, and a fragile global economic backdrop.” “We foresee real GDP growing a muted 1.4% in 2024 following expected growth of 2.4% in 2023.”
Since Federal Reserve Chair Jerome Powell recently stated that the central bank would need to see slower economic activity to guarantee prices continue to drop, the main question for investors will be whether the Fed has already tightened enough to drag the economy down from its hot third quarter.
Powell stated, “We certainly have a very resilient economy on our hands,” during a spoke to the New York Economic Club. Numerous predictions predicted that the US economy will enter a recession this year. Not only has that not occurred, but growth is also above its longer-term tendency for this year. That came as a surprise.