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US Economy Beats Growth Estimates to the Upside

2 mins
Updated by Geraint Price
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In Brief

  • The US economy grew 5.2% quarter on quarter, according to the latest data released by the US Bureau of Economic Analysis.
  • The core PCE rose 2.3% in September, beating estimates of 2.4%, while headline PCE also came in 0.1% lower than expected.
  • Both numbers suggest the Fed may pause interest rates at its next meeting, as the States seems to be responding to hikes.
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The core US Personal Consumption Expenditure (PCE) index rose 2.3% year-on-year. The US economy grew 5.2% in Q3, beating estimates of 5%, and is the highest level of growth since Q4 2021, signaling US Federal Reserve policy has not yet put the economy into a recession.

According to the Bureau for Economic Analysis, the initial gross domestic product (GDP) estimate of around 4.9% was revised after considering revisions to nonresidential fixed investment and state and local government spending. The GDP increase is a symptom of strong private sector demand, according to Gregory Daco, a chief economist at EY News.

Fed Looks Set to Keep Rates Elevated

So-called headline PCE rose 2.8% quarterly, undercutting an advance estimate of 2.9%. Core PCE also came in 0.1% lower than expected. The PCE is the US Federal Reserve’s preferred inflation gauge, as it tracks changes in consumer spending habits and is a more accurate gauge of how prices are affecting households.

Fed Target Rate Expectation Favors Pause
Fed Target Rate Expectation Favors a Pause. Source: CME Group

Experts predict the central bank is unlikely to raise rates at its next meeting after declines in the Consumer Price Index and the strength of the US jobs market suggest its monetary policy is working. It has resisted increasing or decreasing rates at two previous meetings of the Federal Open Markets Committee (FOMC).

How Markets Viewed PCE and GDP

Bitcoin spiked briefly from $38,190.95 to $38,246.74 following the news, while Ethereum rose from $2,055.58 to $2,061.98. The top two cryptos have been fairly indifferent to most US economic data releases in recent months. The markets are waiting for the approval of exchange-traded funds that track the prices of Ethereum and Bitcoin.

Read more: How To Prepare for a Bitcoin ETF: A Step-by-Step Approach

The news is bullish for the stock market since it allays immediate fears of a US recession. It is also good for the bond market since the Bloomberg US Aggregate Bond Index has increased 4.3% in November and appears destined for its best monthly performance since 1985. The yield on the 10-year US Treasury has fallen from 5% one month ago to 4.3% on Wednesday, driven by sentiment the US Federal Reserve could soon cut interest rates.

Read more: 7 Must-Have Cryptocurrencies for Your Portfolio Before the Next Bull Run

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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