US economy grew at a staggering pace this summer as Americans spent on Taylor, Barbie, Beyoncé
Business
Economists expected the nation's GDP to grow at a 4.7pc annual pace in the third quarter
(Web Desk) - The US economy expanded at a staggering pace in the third quarter, defying the twin pressures of persistent inflation and rising interest rates.
The nation's gross domestic product grew at a 4.9% annual pace in the third quarter, the Commerce Department's Bureau of Economic Analysis reported on Thursday.
The data far exceeded the 4.7% economists polled by Dow Jones were expecting.
By contrast, GDP grew by 2.1% in the second quarter and by a revised 2.2% in the first quarter of this year. The latest reading puts the U.S. economy on track to deliver growth of about 2.8% for the year.
"The economy remains resilient, and a recession any time soon is less likely," said Mark Zandi, chief economist for Moody's Analytics, who had forecasted third-quarter GDP to come in at 3.8%.
Low unemployment, solid wage gains and healthy savings accounts overcame the forces of inflation in the third quarter, and rising interest rates haven't dented Americans who took out home equity loans before rates soared.
"Consumers are largely insulated from the higher interest rates as they locked in the
Americans might have pulled back on some big-ticket items like furniture and appliances, but they spent freely on travel and experiences over the summer.
Concert tours by Taylor Swift and Beyoncé, as well as summer blockbuster films “Barbie,” with its more than $1 billion box office, and “Oppenheimer," which is closing in on that number, made headlines in a summertime spending spree. Swift's tours alone were projected to generate billions in economic activity.
In addition to strong consumer spending, the Commerce Department said private inventory investment, federal spending and upturns in exports and residential investments all helped boost growth.
Personal incomes rose while savings fell in the third quarter from the second quarter.
The U.S. economy is the world's largest, measured at $27.62 trillion in annual economic output at the end of the third quarter. China, the world's second largest economy, has a GDP of about $18 trillion.
Third-quarter GDP is a far cry from the expectations of late 2022 and the first half of 2023 when many economists were forecasting a recession.
In September 2022, a Bloomberg Economics model predicted that a U.S. "recession is effectively certain in the next 12 months." And as late as last July, two thirds of 900 institutional investors surveyed by Goldman Sachs said they expected a recession within the next 12 months.
Still, a series of economic headwinds have economists expecting lower economic growth in the fourth quarter. Interest rates are spiking with the 10-Year Treasury yield hovering near a 16-year high of 5%. That includes mortgage rates that are now topping 8% and some store-branded credit cards charging as much as 33% interest.
Other headwinds include the autoworkers strike, the end of a student loan repayment moratorium, a potential government shutdown next month, wars in Israel and Ukraine, and a global economic slowdown.
Zandi, for one, expects economic growth to slow to just 1% in the fourth quarter, but that's still enough to continue averted a once widely predicted recession.
Nationwide chief economist Kathy Bostjancic notes several factors that will weigh on economic growth, including declining savings, slowing employment gains, tighter lending standards and sticky inflation.
"This robust growth is not sustainable," she said.
