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US economic growth was stronger than expected in the third quarter


CNN Company in New York —

The US economy grew much faster than expected in the third quarter, according to the latest gross domestic product report, which showed GDP grew at an annualized rate of 2.9%.

That’s an improvement on the government’s initial reading in October which showed growth in economic activity of 2.6%, and better than Refinitiv’s forecast of 2.7%. And that’s a sharp turnaround from economic contractions of 1.6% in the first quarter of the year and 0.6% in the second.

The better-than-expected growth came as consumer spending rose more than in the government’s previous reading, while the value of imports was revised lower. Imports are subtracted from GDP, which is the general measure of economic activity in the country.

The strong reading doesn’t necessarily remove the risk that many economists have predicted for the US economy to slide into a recession at some point over the next year.

But the stronger-than-expected growth shows the economy’s resilience as it weathers headwinds caused by the Federal Reserve’s aggressive course of steep interest rate hikes in a bid to slow the economy in order to keep decades of high inflation under control.

The U.S. labor market, which will be measured again when Friday’s November jobs report is released, remains strong with employers still hiring and unemployment near a half-century low. And while consumers grapple with higher prices, they continue to spend money. More than two-thirds of US economic activity is driven by consumer spending.

One of the main brakes on economic growth is the decline in spending on housing construction in the face of rising interest rates. The GDP report showed that investment in housing construction reduced overall growth by 1.4 percentage points. This means that the economy would have grown at a very strong annualized rate of 4.3% if housing construction spending had remained stable.

The Federal Reserve’s rate hikes to date have mostly simply pushed the housing sector into a recession where the rest of the economy continues to perform fairly well, said Christopher Rupkey, chief economist at the firm. Fwdbonds market research.

The report gives the Fed the green light to remain aggressive in raising rates, Rupkey said.

Consumer spending and business investment in equipment look good despite the Federal Reserve raising interest rates by 3.75 percentage points this year, he said. If the Fed is trying to slow the economy down with the brakes, it hasn’t done enough yet.




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