The US economy grew faster than initially thought in the third quarter as businesses built more warehouses and accumulated machinery equipment, but momentum appears to have since waned as higher borrowing costs curb hiring and spending. The growth pace, which was the quickest in nearly two years, however, likely exaggerated the health of the economy last quarter. When measured from the income side, economic activity increased at a moderate pace. Nevertheless, the report from the Commerce Department on November 29, 2023 indicated the economy continued to grow despite fears of a recession that have persisted since late 2022.
“No sign of darkening skies for the economy in today’s report, but growth is cooling,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “There’s simply not as much wind in the economy’s sails in the final quarter this year.” Gross domestic product increased at a 5.2 percent annualized rate last quarter, revised up from the previously reported 4.9 percent pace, the Commerce Department’s Bureau of Economic Analysis (BEA) said in its second estimate of third-quarter GDP. It was the fastest pace of expansion since the fourth quarter of 2021. Economists polled by Reuters had expected GDP growth would be revised up to a 5.0 percent rate. The economy grew at a 2.1 percent pace in the April-June quarter and is expanding at a pace well above what Federal Reserve officials regard as the non-inflationary growth rate of around 1.8 percent.
The upward revision to growth reflected upgrades to business investment on structures, mostly warehouses and healthcare facilities. Spending by state and local governments was also revised higher. Residential investment was also raised, thanks to the construction of more single-family homes, helping to end nine straight quarters of contraction. Private inventory investment was higher than previously estimated as wholesalers amassed more machinery equipment. Inventory investment added 1.40 percentage points to GDP growth, instead of the 1.32 percentage points estimated last month.But growth in consumer spending, which accounts for more than two-thirds of US economic activity, was lowered to a still-solid 3.6 percent rate. The downgrade from the previously estimated 4.0 percent growth pace was because of cuts to outlays on financial services and insurance as well as used light trucks, likely the result of shortages caused by the recently ended United Auto Workers strike. Stocks on Wall Street were trading higher. The dollar was steady versus a basket of currencies. US Treasury prices rose. https://tinyurl.com/456s3en6
Source: IBP