The U.S. economy demonstrated robust growth in the last quarter, expanding at an annual rate of 2.8% from July to September. This increase reflects strong consumer spending, even amid persistently high interest rates.
Consumer Spending Fuels Growth
According to a report from the Department of Commerce, the gross domestic product (GDP) showed a slight slowdown from the 3% growth recorded in the previous quarter. However, the latest figures highlight the economy’s resilience as Americans assess their financial situation ahead of the presidential race.Consumer spending, which constitutes approximately 70% of U.S. economic activity, surged at an annual rate of 3.7% in the last quarter, up from 2.8% in the April to June period. Additionally, exports contributed significantly to growth, increasing at a remarkable rate of 8.9%.
Business Investment Trends
While consumer spending thrived, business investment saw a notable decline due to reduced spending on housing and non-residential buildings like offices and warehouses. However, investment in equipment did see an uptick, indicating some positive trends in business expenditures.The report marks the first of three estimates regarding GDP growth for this quarter. Despite higher borrowing costs imposed by the Federal Reserve in 2022 and 2023 to combat inflation, the economy has continued to expand. Many analysts anticipated a recession that has yet to materialize, as hiring remains steady and consumer expenditure persists.
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Consumer Confidence and Job Market
A recent report from the Conference Board indicated that consumer confidence reached its highest level since January 2024. The percentage of consumers expecting a recession within the next year dropped to its lowest level since July 2022.Despite these positive indicators, the job market has begun to show signs of slowing down. The number of job openings fell to its lowest level since January 2021, with employers adding an average of 200,000 jobs per month this year—a healthy figure but lower than previous years.
Future Job Growth Expectations
On Friday, the Labor Department is expected to announce that approximately 120,000 jobs were added in October. However, this figure may be affected by recent hurricanes and a strike at Boeing, which temporarily impacted employment numbers.
Inflation peaked at 9.1% in June 2022 but has since decreased to 2.4%, slightly above the Federal Reserve’s target of 2%. While prices remain higher than pre-pandemic levels, many Americans feel frustrated by these costs.
Federal Reserve’s Monetary Policy
In its latest meeting, the Federal Reserve expressed satisfaction with progress against inflation while acknowledging concerns about the slowing job market. As a result, it implemented a significant half-point reduction in its benchmark interest rate—the first major cut in over four years.
Looking ahead, policymakers anticipate further rate cuts during their final meetings of 2023 and into 2025 and 2026. These adjustments are expected to lead to lower borrowing costs for consumers and businesses over time.
Despite challenges like inflation and a shifting job market, the U.S. economy remains resilient and adaptable in navigating complex financial landscapes.
