WASHINGTON — The nation’s economic system expanded at a strong 4.9% annual charge from July by way of September as Americans defied increased costs, rising rates of interest and widespread forecasts of a recession to spend at a brisk tempo.
The Commerce Department mentioned the economic system expanded final quarter on the quickest tempo in practically two years — and greater than twice the two.1% annual charge of the earlier quarter.
Thursday’s report on the nation’s gross home product — the economic system’s whole output of products and companies — confirmed that customers drove the acceleration, ramping up their spending on every thing from vehicles to restaurant meals. Even although the painful inflation of the previous two years has soured many individuals’s view of the economic system, thousands and thousands have remained keen to splurge on holidays, live performance tickets and sports activities occasions.
“This is just a very resilient economy that continues to take hit after hit and keep on,” mentioned Joseph Brusuelas, chief economist at RSM, a tax and consulting agency.
Yet the sturdy progress might show to be a high-water mark for the economic system earlier than a gentle slowdown begins within the present October-December quarter and extends into 2024. The breakneck tempo is predicted to ease as increased long-term borrowing charges, on prime of the Federal Reserve’s short-term charge hikes, cool spending by companies and customers. Economists have projected that progress may sluggish to an annual tempo of simply 1.5% within the last three months of this 12 months.
One signal of the approaching slowdown, Brusuelas mentioned, was a 3.8% drop in enterprise spending on new equipment and different gear final quarter. That pullback seemingly mirrored the upper price of borrowing to finance such purchases.
An enhance in home and condo building additionally boosted progress within the third quarter. But as mortgage charges close to 8% and gross sales of current houses proceed to fall, analysts anticipate housing to weaken the general economic system within the coming months.
“We can already see the drag forming in the final three months of the year,” Brusuelas mentioned.
In addition, customers are spending extra of their financial savings — a drawdown that would finally weigh on progress. Many, notably lower- and middle-income Americans, are stepping up their use of bank cards. These playing cards now carry a lot increased charges after the Fed boosted its benchmark rate of interest to about 5.4%, its highest degree in 22 years. Americans, as a complete, saved simply 3.8% of their revenue final quarter, down from 5.2% within the April-June quarter and notably under pre-pandemic ranges.
Several Fed officers acknowledged in speeches final week that the latest financial information confirmed progress choosing up by greater than that they had anticipated. Yet many of the policymakers signaled that they are going to seemingly preserve their key charge, which impacts many client and enterprise loans, unchanged after they meet subsequent week.
Source: www.bostonherald.com”