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Business News/ Economy / US GDP growth beats Street estimates, expands an annual rate of 4.9% in Q3
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US GDP growth beats Street estimates, expands an annual rate of 4.9% in Q3

The US economy grew at the fastest pace in nearly two years, buoyed by a strong consumer in spite of higher interest rates, ongoing inflation pressures, and a variety of other domestic and global headwinds.

The reading followed the 2.1 per cent growth recorded in the second quarter and surpassed the market expectation of 4.2 per cent. Photo: AFPPremium
The reading followed the 2.1 per cent growth recorded in the second quarter and surpassed the market expectation of 4.2 per cent. Photo: AFP

The gross domestic product (GDP) of the US expanded at an annualized rate of 4.9 per cent in the third quarter, the US Bureau of Economic Analysis' (BEA) first estimate showed on Thursday, October 6. The US economy grew at the fastest pace in nearly two years, buoyed by a strong consumer in spite of higher interest rates, ongoing inflation pressures, and a variety of other domestic and global headwinds.

The US GDP reading followed the 2.1 per cent growth recorded in the second quarter and surpassed Wall Street expectations of 4.2 per cent. Economists surveyed by Dow Jones expected the GDP to accelerate at 4.7 per cent, which also is adjusted for inflation.

Also Read: US Fed Meeting: At 5.25%-5.5%, FOMC holds rates unchanged at 22-year high-mark

“The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, and residential fixed investment that were partly offset by a decrease in nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased", the BEA explained in its press release.

Consumer spending in the US, as measured by personal consumption expenditures, increased 4 per cent for the quarter after rising just 0.8 per cent in the second quarter. The gross private domestic investment surged 8.4 per cent and government spending and investment jumped 4.6 per cent, showed US government data.

The data reflects the lift from a strong US labor market. Traders added to bets the Federal Reserve will keep policy on hold through this year and will begin interest rate cuts in mid-2024, despite the US economy growing at its fastest pace since late-2021.

The US Federal Reserve announced its interest rate decision last month after a two-day Federal Open Market Committee (FOMC) meeting and left the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent.

Federal Reserve Chair Jerome Powell said on October 19 that inflation in the US remains too high and bringing it down to the Fed's 2 per cent target level will likely require a slower-growing economy and job market. Powell's remarks appeared to push back against market expectations that the rate hikes by the US central bank had reached an end.

About 15 minutes into trading, the Dow Jones Industrial Average was up 0.2 percent at 33,091.52. The broad-based S&P 500 slipped 0.2 percent to 4,179.95, while the tech-rich Nasdaq Composite Index dropped 0.3 percent to 14,328.88, according to news agency AFP.

 

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Published: 26 Oct 2023, 07:40 PM IST
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