The US Economy Surges with Impressive 49% Growth in Q3
The US economy defied expectations and grew at a robust 49% rate in Q3, surpassing the previous quarter's pace Despite higher interest rates, consumer spending remained strong, demonstrating the economy's resilience However, challenges lie ahead with rising bond yields and the resumption of student loan repayments Stay tuned for updates on this developing story
Despite interest rates reaching a 22-year high, the US economy experienced substantial growth in the third quarter. According to the Commerce Department's report on Thursday, the gross domestic product (GDP), which measures the production of all goods and services in the economy, expanded by an annualized rate of 4.9%. This surpasses the 2.1% growth rate in the second quarter and exceeds economists' expectations of a 4.3% rate.
Consumer spending drove robust growth in the third quarter, showcasing the economy's surprising strength despite higher borrowing costs and persistent inflation. Between July and September, spending increased by an annualized rate of 4%, marking its strongest performance since the last quarter of 2021. Americans indulged in both goods and services.
Contrary to predictions following the spring banking crisis, the US GDP experienced its fastest expansion in nearly two years during the July-through-September period. This defies expectations of a recession by now. In addition to consumers' increased spending, other sectors of the economy are also demonstrating resilience.
According to Thursday's GDP report, residential fixed investment, an indicator of the housing market, grew by 3.9% on an annualized basis in the third quarter. This marked the first time in over two years that this component contributed to economic growth. However, it is unlikely that this positive trend will persist due to various challenges the economy is currently confronting, such as rising bond yields and the restart of student loan repayments.
The Federal Reserve's optimism is bolstered by this expectation, as they have increased interest rates 11 times since March 2022 in order to curb inflation and slow down the economy. The possibility of a 12th rate hike in December remains, but the economy's resilience may result in prolonged high interest rates.
Additionally, the third-quarter GDP report indicates a 0.1% decline in nonresidential fixed investment, which refers to business spending.
This story is developing and will be updated.
