US Economic Growth Slows to 4.9% in Q3 2023
The US Economic Growth Slows to 4.9% witnessed a slight dip in the third quarter compared to the previous estimate, but it remains robust, showcasing the resilience of America’s economy during the summer.
As reported by the Commerce Department, the Gross Domestic Product (GDP), the comprehensive gauge of economic output, expanded at an annualized rate of 4.9% from July through September. This figure reflects a slightly slower pace of growth compared to the earlier reported 5.2% in the second estimate.
The third-quarter growth marked the strongest in nearly two years, primarily fueled by increased spending on live concerts, films, and consumer goods. Despite a slowdown from the earlier rapid pace, the economy continues to exhibit solid performance in both hiring and spending.
The final estimate from the department considered various factors such as weaker consumer spending, inventory investment, and exports, while revising government outlays and business investment upwards. Particularly, consumer spending, constituting about two-thirds of economic output, was revised down to 3.1% from the previous 3.6%.
Implications on Interest Rates
Market sentiments and forecasts suggest an anticipation of interest rate cuts by the Federal Reserve in the coming months. However, recent statements from officials indicate a reevaluation of this optimism. Some experts perceive the current economic scenario as potentially achieving a soft landing, wherein inflation aligns with the Fed’s 2% target without a significant increase in unemployment.
Prospects of Rate Cuts
The Fed’s latest economic projections signal the possibility of three rate cuts in the upcoming year. This inclination is rooted in the relief over easing inflation levels, which had briefly surged earlier in 2023. Notably, the Consumer Price Index (CPI) registered a 3.1% rise in November from a year earlier, down slightly from October’s 3.2%. This decline followed a spike to 3.7% in the summer due to escalated energy costs that have subsided recently.
The Road Ahead
Despite these indicators, the exact timing of rate cuts remains uncertain. Futures suggest a potential initial cut in March; however, Fed officials have been cautious in managing market expectations.
John Williams, New York Fed President, emphasized, “We aren’t really talking about rate cuts.” Similarly, Chicago Fed President Austan Goolsbee highlighted that.