U.S. GDP Grew at a 4.9% Annual Pace in the Third Quarter, Beating Expectations
October 26, 2023
The U.S. economy grew at a faster-than-expected pace in the months between July and September, buoyed by strong consumer spending that persisted in the face of higher interest rates, ongoing inflationary pressures, and a variety of other headwinds facing the global and domestic economy.
Gross domestic product (GDP), which tracks all of the goods and services produced in the U.S., rose at a seasonally adjusted 4.9% annualized pace during the third quarter. That is up from an unrevised 2.1% pace during the second quarter, according to the Commerce Department. Economists surveyed by Dow Jones had been anticipating a 4.7% increase.
The stark increase was primarily driven by strong consumer spending,but increased inventories, exports, residential investment, and government spending also contributed.
Consumer spending, as measured by personal consumption expenditures, increased 4% for the quarter after rising just 0.8% in Q2, and was responsible for 2.7 percentage points of the total GDP increase. Inventories contributed 1.3 percentage points. Gross private domestic investment surged 8.4% and government spending and investment jumped 4.6%.
The GDP increase marks the largest gain since the fourth quarter of 2021.
The strong report could give the Federal Reserve some impetus to keep monetary policy tight, as, up until now, the Fed’s attempts to curb economic growth have been challenged by the resiliency of the economy. Still, traders are pricing zero chance of an interest rate hike when the central bank meets next week, and just a 27% chance of an increase in December, according to data from the CME Group.