US GDP grows by 5.2% in third quarter, faster than initially thought

Economy accelerated from July to September, report shows

The Wall Street Bull in the Manhattan, New York City. Reuters
Powered by automated translation

The US economy grew at a faster-than-expected pace in the third quarter, showing that consumers so far have largely been undaunted by higher interest rates although underlying numbers suggest momentum could be slowing down.

Gross domestic product advanced 5.2 per cent, a revision from 4.9 per cent, according to a report from the Commerce Department.

Strong economic growth followed second-quarter increase of 2.1 per cent.

The new figure reflected upwards revisions in businesses buying machinery, and state and local government spending.

Meanwhile, consumer spending, which accounts for 70 per cent of US economic activity, was revised downwards from 4.0 per cent to 3.6 per cent.

But economists expect the US's bumper third quarter will not last, and a separate report from the Federal Reserve on Wednesday hinted that economic growth in the fourth quarter may not be as strong.

"On balance, economic activity slowed since the previous report," the Fed reported in its Beige Book on economic conditions for November.

US consumers showed "more price sensitivity" last month as sales on discretionary items such as furniture and appliances declined last month, the Fed reported.

Demand for labour continued to ease although several Federal Reserve districts described jobs markets as "tight".

Overall, Wednesday's reports add to growing hopes that the Fed can achieve a soft landing.

By raising interest rates to a 22-year high, the Fed hopes that it can moderate inflation without driving the economy into a recession.

Recent economic reports strengthen this confidence. Consumer Price Index inflation has fallen to 3.2 per cent, far lower than the 9.1 per cent last summer.

The Personal Consumption Expenditures Price Index was revised downwards to 2.8 per cent.

Fed officials projected the economy to expand by a range of 1.9 to 2.2 per cent this year, according to its September projections.

Updated: November 30, 2023, 6:30 AM