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The US economy grew by an annualised rate of 2.8 per cent in the third quarter, a slight slowdown compared with the previous period but still reflecting strong consumer spending.
The data on Wednesday from the Bureau of Economic Analysis showed GDP fell slightly short of economists’ estimates for a 3 per cent expansion and was just shy of the 3 per cent rate registered the previous quarter.
The continued strength was a reflection of the willingness of American consumers to keep opening their wallets, despite lingering inflation pressures.
Consumer spending accelerated to 3.7 per cent, while one closely watched proxy for demand that strips out inventories, trade and government spending — called final sales to domestic private purchasers — jumped to 3.2 per cent from 2.7 per cent in the last quarter. Residential investment, however, slipped by 5.1 per cent.
“Where it counts, growth performed incredibly well in the third quarter,” said Tom Porcelli, chief US economist at PGIM Fixed Income. “It’s very hard to really practically think of having a recession over the near to medium term.”
The data, which covers the period between July and September, confirms the strength of the world’s largest economy, which has repeatedly defied expectations of a recession despite the Federal Reserve holding interest rates high to stamp out inflation.
The US central bank cut rates by a larger than usual half-point last month — its first reduction since 2020 — leaving the benchmark at 4.75 to 5 per cent.
Evidence of the US economy’s resilience comes just days before Americans vote to elect the country’s new president. Kamala Harris, the Democratic vice-president, has touted the current administration’s handling of the economy, although her opponent Donald Trump has blamed it for inflation and high living costs.
Even as inflation has lingered, however, US consumer spending has remained robust, buoyed by the country’s healthy jobs market. The unemployment rate has risen to 4.1 per cent from its multi-decade low of 3.4 per cent in 2023.
Economists say the uptick in joblessness is due to more workers entering the labour market because of higher immigration. That has helped ease wage pressures, and in turn inflation, with limited damage to the jobs market — bringing into sight a so-called soft landing for the economy as the Fed begins to cut rates.
The US has outperformed its peers among the world’s strongest economies. The IMF recently forecast growth from the US of 2.8 per cent this year and 2.2 per cent next year, versus 3.2 per cent in both years for the global economy as a whole. US consumer confidence has also been strong, and hit a nine-month high in October, according to a report on Tuesday from the Conference Board.
The report showed that the proportion of consumers expecting a recession over the next 12 months fell to its lowest level since the question was first asked in July 2022. The percentage who thought the economy was already in a contraction also fell.
Market moves were muted following the release of Wednesday’s GDP data, with the policy-sensitive two-year yield up 0.03 percentage points to 4.15 per cent and the benchmark 10-year yield broadly flat at 4.27 per cent. Yields move inversely to prices.
US stock futures were also little changed, with contracts tracking the S&P 500 flat an hour before the New York opening bell.
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