A surge in the United States economy during the third quarter was driven by a strong job market and declining inflation, which boosted consumer spending on goods and services. According to the Commerce Department’s report released on Thursday, the gross domestic product expanded at an annualized rate of 4.9 percent from July through September. This growth rate surpassed earlier forecasts and represented the strongest performance since late 2021, defying expectations of a slowdown triggered by the Federal Reserve’s interest rate hikes.
Yelena Shulyatyeva, a senior economist at BNP Paribas told the breaking news network, “We’ve seen a substantial growth in wealth since the onset of Covid.” She referred to the latest Federal Reserve data, which revealed a 37 percent increase in median net worth between 2019 and 2022. “People are now taking not just one or two vacations, but three or four.”
Slower inflation, along with a revitalized job market in recent months, contributed to this acceleration. Despite weakened wage growth, consumers enjoyed increased purchasing power. While this growth rate is a preliminary estimate that could be adjusted with more data, it stands in stark contrast to the recession that many experts had anticipated a year ago. Economists eventually recognized that Americans had accumulated substantial savings, providing the impetus for continued spending even as the Federal Reserve tightened borrowing conditions.
Robust job growth in service industries like hotels and restaurants was underpinned by the substantial spending of higher-income earners, while sectors aligned with pandemic shopping trends, such as transportation and warehousing, reverted to more conventional levels. Nevertheless, there are indications that consumers are nearing the end of their financial resources. In the quarter, both disposable personal income, adjusted for inflation, and the personal savings rate declined.
While layoffs remain exceptionally rare, workers have little motivation to delay their spending, even if it involves using borrowed money, which has become a more costly option with the uptick in interest rates. Retail sales have been on the upswing in recent months, and credit card balances have increased as well. Amanda McClements, who owns the home goods store Salt & Sundry in Washington, D.C., is among those profiting from the surge in consumer spending. Her sales according to the breaking news network have risen by about 15 percent compared to the previous year and have finally surpassed 2019 levels.
In the third quarter, consumer activity was the driving force behind the economy’s growth, yet other elements also played a crucial role. Government spending, particularly in defense, continued to fuel growth, notably with the replenishment of weapons and ammunition following aid to Ukraine. Additionally, residential investment contributed positively for the first time in two years, even as interest rates increased.
As of now, the United States is outshining other significant economies, largely due to its vigorous fiscal response to the pandemic and its partial insulation from the Ukraine war’s effects on energy prices. According to Andrew Hunter, Deputy U.S. Economist at Capital Economics, “The eurozone and the U.K. appear to be teetering on the edge of recession, if not already in one. The U.S. remains an exceptional case on the global stage.”