The Bureau of Economic Analysis (BEA) reports that the U.S. economy expanded at an annualized rate of 5.2% in the third quarter of 2023, demonstrating impressive resiliency. This strong growth, which above analysts’ projections, represented a notable improvement from the flat performance of the previous quarter.
The pace of growth, which had been the strongest in almost two years, seems to have exaggerated the state of the economy last quarter. The economic activity increased at a moderate rate from an income point of view. Nevertheless, the Commerce Ministry’s latest report on Wednesday showed that despite fears of a downturn which has been ongoing since end 2022, the economy was still growing.
The third-quarter surge was driven by a surge in business investment, which soared by 11.4%. This increase in investment reflected businesses’ optimism about the economic outlook and their willingness to expand operations. Additionally, government spending contributed to the growth, advancing by 2.3%.
The department’s initial estimate of 4.9% growth rate was surpassed by the latest measurement on Wednesday, indicating an even greater rate of increase. It takes into account increased government spending, company investment, household investment, and inventory expansion.
“On balance, economic activity slowed since the previous report,” the Fed reported in its Beige Book on economic conditions for November.
According to the Fed, US consumers displayed “more price sensitivity” last month as purchases of luxuries like appliances and furnishings fell.
The Fed intends to contain inflation without sending the economy into a recession by hiking interest rates to a 22-year high.
Resilient hiring combined with declining inflation has increased expectations that the Fed can pull off a “soft landing,” raising rates just enough to curb price increases and chill the economy without sending it into recession.
This confidence is strengthened by recent economic reports. Inflation measured by the Consumer Price Index has decreased to 3.2% from 9.1% during the previous summer.
Looking ahead, the U.S. economy is expected to face continued challenges in the coming quarters. Inflation remains a concern, and the Federal Reserve is likely to continue raising interest rates to combat it. However, the economy’s strong performance in the third quarter suggests that it is well-positioned to weather these challenges and maintain its momentum.