The US economy expanded by 4.9% in the third quarter of the year, more than half a percent higher than expectations of 4.3%. This is the biggest jump since Q4 2022 and the fifth consecutive quarterly increase in GDP.
The main driver of this growth was robust consumer expenditure, which contributed to a 4.9% annualized increase in the gross domestic product (GDP), as per the initial data released by the Bureau of Economic Analysis, a division of the Commerce Department.
Fed Hopes to Steer US Economy Towards 2% Goal
The increase, up from 2.1% last quarter, is the most robust since the final quarter of 2021. It also exceeded the average economists’ forecast of a 4.3% rate.
This news comes as the Federal Reserve (Fed) gears up for a meeting next week to determine interest rates. The central bank has been leveraging higher rates in an attempt to steer inflation towards its 2% goal without triggering a severe economic downturn.
The GDP numbers are not expected to significantly sway the decision in the upcoming meeting, given that they reflect past performance compared to monthly metrics like inflation and employment figures.
Read more: How to Protect Yourself From Inflation Using Cryptocurrency
The consensus is that the Fed will maintain the interest rates at the highest level in 22 years, allowing policymakers additional time to gauge the impact of their previous rate hikes and recent market phenomena, including a significant bond market sell-off.
How Long Will Interest Rates Remain High?
Positive growth data underscores the economy’s strength, suggesting high interest rates will persist for an extended period. Long-term 10- and 30-year Treasury bonds, which have recently experienced a significant sell-off, are especially sensitive to growth projections.
Certain economic sectors have felt the pinch of rising interest rates, notably the real estate sector. As mortgage rates climbed, sales of existing homes in September slumped to their slowest rate in 13 years.
Read more: 7 Ways To Handle Retirement With Increasing Inflation
Consumer expenditure was robust, exceeding economists’ predictions. Solid retail sales data this week pushed 10-year Treasury yield to a 16-year peak.
The figures released on Thursday are preliminary. The Bureau of Economic Analysis plans to release a second estimate later next month and a final figure in December.
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