{"id":6310,"date":"2023-10-28T06:59:16","date_gmt":"2023-10-28T06:59:16","guid":{"rendered":"https:\/\/infundpros.com\/business\/the-us-economy-grew-at-a-blistering-rate-despite-high-interest-rates\/"},"modified":"2023-10-28T06:59:16","modified_gmt":"2023-10-28T06:59:16","slug":"the-us-economy-grew-at-a-blistering-rate-despite-high-interest-rates","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=6310","title":{"rendered":"The US economy grew at a blistering rate despite high interest rates"},"content":{"rendered":"
\n

\n The US economy expanded at a remarkably strong pace in the third quarter, despite interest rates at their highest level in 22 years.\n <\/p>\n

\n Gross domestic product, a measure of all goods and services produced in the economy, grew at an annualized 4.9% rate in the third quarter, the Commerce Department reported Thursday. GDP is adjusted for inflation and seasonal swings.\n <\/p>\n

\n That\u2019s well above the second quarter\u2019s 2.1% pace and faster than economists\u2019 expectations of a 4.3% rate.\n <\/p>\n

\n Robust consumer spending fueled growth in the third quarter, a sign of the economy\u2019s surprising resilience in the face of tougher borrowing costs and persistently high inflation. Spending grew from July through September by an annualized rate of 4%, its strongest pace since the fourth quarter of 2021. Americans splurged both on goods and services.\n <\/p>\n

\n Indeed, packed Taylor Swift and Beyonc\u00e9 concerts and record tickets sales for the \u201cBarbie\u201d film were a hallmark of this year\u2019s summer months. Americans also spent big on travel.\n <\/p>\n

\n GDP expanded in the July-through-September period at its fastest pace in nearly two years, defying expectations in the aftermath of the spring banking crisis that the US economy would slip into recession by now.\n <\/p>\n

\n US Treasury Secretary Janet Yellen cheered Thursday\u2019s report as an example of the American economy\u2019s resilience, but echoed a common view among economists that growth will likely slow.\n <\/p>\n

\n \u201cIt\u2019s a good, strong number and it shows an economy that\u2019s doing very well,\u201d Yellen said during a discussion hosted by Bloomberg TV in Washington. \u201cLet\u2019s remember that it is just one quarter\u2019s number and I\u2019m not expecting growth at that pace to continue.\u201d\n <\/p>\n

\n Not only have US consumers continued to open up their wallets, but other parts of the economy are also displaying some resilience.\n <\/p>\n

\n Residential fixed investment, which reflects conditions in the housing market, advanced at a 3.9% annualized rate in the third quarter, Thursday\u2019s GDP report showed. That\u2019s the first time that component contributed to growth in more than two years.\n <\/p>\n

\n The third-quarter GDP report also showed that business spending \u2014 known as nonresidential fixed investment \u2014 declined 0.1% in the third quarter. Inventories and federal government outlays also contributed to growth in the third quarter.\n <\/p>\n

\n The US economy\u2019s strength isn\u2019t expected to continue, as it faces a number of headwinds, including soaring bond yields and the resumption of student loan repayments.\n <\/p>\n

\n \u201cInvestors should not be surprised that the consumer was spending in the final months of the summer. The real question is if the trend can continue in the coming quarters \u2014 and we think not,\u201d wrote Jeffrey Roach, chief economist at LPL Financial, in an analyst note.\n <\/p>\n

\n That expectation bodes well for the Federal Reserve, which has raised interest rates 11 times since March 2022 to slow the economy to defeat inflation. Fed Chair Jerome Powell has said the US central bank needs to see \u201cbelow-trend growth\u201d to be assured that inflation is on track to slow to 2%, the Fed\u2019s inflation target, since red-hot demand could be putting some upward pressure on prices.\n <\/p>\n

\n So-called \u201ccore inflation,\u201d measured by the Fed\u2019s preferred inflation gauge that strips out volatile food and energy prices, rose 3.9% in August from a year earlier. That\u2019s down from a peak of 5.6% in early 2022, but well above the Fed\u2019s inflation goal. Inflation overall also remains above 2%.\n <\/p>\n

\n A 12th rate hike remains on the table, possibly in December, but the Fed\u2019s main strategy now to defeat inflation is to keep rates higher for longer. The Fed\u2019s latest set of economic projections released in September showed that Fed officials expect fewer rate cuts next year.\n <\/p>\n

\n Powell said high Treasury yields are currently playing an important role in cooling the economy.\n <\/p>\n

\n \u201cIf you look at financial conditions indexes, they\u2019re showing tightening [and] it\u2019s a lot because of longer rates,\u201d Powell said in discussion hosted by the Economic Club of New York earlier this month.\n <\/p>\n

\n The 10-year Treasury yield hovered near a key 5% threshold Thursday morning before retreating to 4.89% in the afternoon as investors digested the latest GDP data.\n <\/p>\n

\n Yellen on Thursday said surging bond yields largely reflect \u201cthe resilience that people are seeing in the US economy\u201d and \u201cthe notion that interest rates will be higher for longer.\u201d\n <\/p>\n

\n In addition to the resumption of student loan repayments this month and soaring yields, the United States is also dealing with trillions of dollars in federal debt, two ongoing wars, and the possibility of a government shutdown next month.\n <\/p>\n

\n One theme of the American economy this year has been resilience, but that will certainly be put to the test in the coming months.\n <\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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