In an impressive display of resilience, the U.S. economy grew faster than initially estimated in the third quarter of 2023, with a revised GDP growth rate of 5.2%, up from the previously reported 4.9%. This expansion rate, the quickest in nearly two years, signals strong economic performance despite ongoing fears of a recession and the impact of higher interest rates. The revision was primarily due to increased business investment in structures such as warehouses and healthcare facilities and a boost from state and local government spending and residential investment.
Although the overall GDP growth was robust, consumer spending growth was revised to a 3.6% rate from an initially estimated 4.0%. This adjustment reflects cuts to outlays on financial services, insurance, and used light trucks, partly attributed to the effects of the United Auto Workers strike. The report also highlighted a mixed economic outlook as retail sales dropped for the first time in seven months in October, and job growth slowed, with unemployment rising to a nearly two-year high of 3.9%.
The period also saw corporate profits increase by 4.3%, with after-tax profits without inventory valuation and capital consumption adjustments reflecting growth across domestic financial and non-financial corporations. Additionally, personal income was higher than initially estimated, leading to an increased saving rate of 4.0% from 3.8%. This rise in income and savings indicates a potentially stronger consumer base despite the cooling in consumer spending.
The U.S. economy’s performance in the third quarter of 2023 illustrates a complex landscape where growth remains strong but is accompanied by signs of slowing momentum due to higher borrowing costs. As we move into the final quarter of the year, the balance between sustaining growth and managing inflationary pressures remains a critical challenge for policymakers and market participants alike.
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