The U.S. economy has shown remarkable growth in the third quarter of 2023, according to the latest data from the Commerce Department.
The gross domestic product (GDP), which measures the total value of goods and services produced in the country, increased at an annualized rate of 4.9% in the July-September period, the fastest pace since the fourth quarter of 2021.
This exceeded the expectations of economists, who had forecast a 4.3% growth rate.
The main driver of the economic expansion was consumer spending, which accounts for more than two-thirds of US economic activity. Consumers defied higher prices, rising interest rates, and widespread forecasts of a recession to spend at a brisk rate, especially on durable goods, such as cars, furniture, and appliances. Consumer spending rose by 5.6% in the third quarter, up from 4.8% in the second quarter.
Another factor that contributed to the strong growth was business investment, which increased by 7.9% in the third quarter, after declining by 1.2% in the second quarter. Businesses increased their spending on equipment, software, and research and development, reflecting their optimism about future demand and profitability.
The U.S. economy also benefited from a positive contribution from net exports, which added 0.5 percentage points to the GDP growth. Exports rose by 8.9%, while imports fell by 0.6%, indicating that the US was able to sell more goods and services abroad than it bought from other countries.
The only major drag on the economic growth was government spending, which decreased by 1.5% in the third quarter, after increasing by 4.6% in the second quarter. The decline was mainly due to a drop in federal nondefense spending, which reflected a slowdown in pandemic-related relief programs.
The robust growth rate achieved in the third quarter is unlikely to be sustained in the fourth quarter, as some factors that boosted the economy may fade or reverse. For example, the United Auto Workers strikes and the resumption of student loan repayments by millions of Americans could have a negative impact on consumer spending and income.
Moreover, the surge in U.S. Treasury yields and the stock market selloff could tighten financial conditions and dampen business and consumer confidence.
However, most economists have revised their forecasts and now believe that the U.S. economy can avoid a recession and maintain a moderate growth rate in the coming quarters. They point to the strength in worker productivity and moderation in unit labor cost growth, which suggest that the economy is not overheating or facing inflationary pressures.
They also expect that the Federal Reserve will keep interest rates unchanged at its next policy meeting on October 31-November 1, and will continue to monitor the economic data before deciding on any changes.
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Readers Bureau, Contributor
Edited by Jesus Chan
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