the American economy It grew faster in the third quarter than previously reported as US consumers continued to spend even in the face of painfully high inflation and rising interest rates.
In its third and final reading of the data on Thursday, the Commerce Department said gross domestic product, the broadest measure of goods and services produced across the economy, grew 3.2% year-on-year in the three-month period from July to September. That compares with the 2.9% increase previously reported.
The change resulted from a significant upward revision to personal consumption, which rose by 2.3% in the final report compared to the previous reading of 1.7%. Services spending was also stronger in the third quarter than initially reported.
These figures confirm that consumer spending remains strong, despite sharp inflation and high interest rates. Employment also remained strong despite increasing economic headwinds.
Inflation eased more than expected in November to 7.1%, but consumer prices remain high
However, there are growing expectations on Wall Street that consumer resilience will fade in 2023 and that the US economy will collapse into recession.
That’s because the Federal Reserve is embarking on one of the fastest courses of monetary tightening in decades as it seeks to wrestle consumer prices still near a 40-year high of 2%.
In a worrying development, the Fed’s rate hikes have so far failed to tame inflation, which remains stubbornly high: the government reported earlier this month that the consumer price index rose 7.1% in November from a year earlier, about three times as much as before the pandemic. . Rate.
This suggests that the Fed will have to continue to chart its aggressive course, increasing the odds of crushing consumer demand and causing unemployment to rise. Policymakers have already agreed to seven consecutive interest rate increases – including four increases of 75 basis points – and have indicated that they plan to continue raising rates in 2023.
Higher interest rates tend to create higher rates on consumer and business loans The economy slows down By forcing employers to cut back on spending.
american bank, Goldman Sachs and Deutsche Bank are among the big Wall Street firms that predict a recession next year, though they are still not sure how severe it will be.
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Still, Federal Reserve Chairman Jerome Powell He reversed that expectation during his post-meeting press conference last week, suggesting that lower inflation rates could boost prospects for a soft landing — the good point between curbing inflation without stabilizing growth.
“To the extent that we need to keep rates higher and keep them there longer and inflation moves higher and higher, I think that narrows the runway,” Powell told reporters. “But lower inflation readings, if sustained, in time could certainly make it possible. I don’t think anyone knows whether or not we’re going to have a recession, and if we do, whether it will be one or not. It’s unknown.”
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