This Thursday, October 26, the Department of Commerce published the first of three estimates of how the US economy will perform in the third quarter of 2023. Gross Domestic Product (GDP) increased, both quarterly and annually.
The US economy grew nearly 5% year-on-year in the third quarter of this year, again defying warnings of a recession, according to official figures. This is the highest pace in almost two years and more than double the 2.1% that the economy grew in the previous quarter.
The Commerce Department explained that higher wages due to a tight labor market helped boost consumer spending and businesses filled at a pace to meet strong demand.
The report on the country’s gross domestic product (the total economic output of goods and services) shows that consumers are driving the outcome, as they increase their spending on everything from cars to food in restaurant.
Although public spending increased, Business investment fell for the first time in two yearsbecause the costs of equipment such as computers decreased and the desire to build factories disappeared.
A look ahead: higher borrowing costs and persistent inflation
Strong growth may pick up in the economy before starting a sustained slowdown in the current October-December quarter and lasting until 2024.
In the outlook for the fourth quarter, analysts see a drop in the savings rate, coupled with the continuation of student loan payments since October, which could put a dent in spending. .
Additionally, as low-income consumers increasingly rely on debt to finance their purchases, Higher interest rates threaten to increase credit card delinquencies.
Indeed, Mortgage rates are at a 23-year high and are approaching 8% per year, which is why sales of used homes continue to fall. Analysts expect the housing sector to weaken the overall economy in the coming months.
National Economic Council Director Lael Brainard praised the numbers but warned that borrowing costs would hurt future expectations.
“In fact, consumers and businesses consider the cost of credit and that, in my opinion, is an obstacle to the economy. Despite that, we have seen a really strong GDP, 4.9% (annual) in the third quarter,” explained he said in a press conference.