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Shoppers carry bags at Polaris Fashion Place mall during Black Friday, Friday, November 24, 2023 in Columbus, Ohio, USA.
U.S. economic growth in the third quarter was slightly lower than previously reported, but remained strong, highlighting the absolute strength of the U.S. economy over the summer.
Gross domestic product, the broadest measure of economic output, expanded at an annual rate of 4.9% from July to September, the Commerce Department reported Thursday. This is a slower growth pace than the 5.2% reported in the second estimate.
The third quarter's growth was the strongest in nearly two years as Americans spent money on live concerts, movies and merchandise. Although the U.S. economy has slowed from the breakneck pace it set at the start of the year, employment and spending both remain strong.
The ministry's final estimates incorporate weaker consumer spending, inventory investment and exports, while government spending and business investment have been revised upward. Personal consumption, which accounts for about two-thirds of economic output, was revised downward from 3.6% to 3.1%.
Investors are bullish that the Fed is prepared to cut interest rates in the coming months, but officials have recently tempered that optimism. Others believe the economy is locking in a soft landing, a scenario in which inflation returns to the Fed's 2% target without a sharp rise in unemployment.
Interest rate cuts seem to have been a hot topic lately. The latest set of economic forecasts released by the Federal Reserve earlier this month showed central bank officials deciding to cut interest rates three times next year.
Investors and the Fed are relieved that inflation is easing again after briefly picking up in early 2023. The closely watched consumer price index in November rose 3.1% compared to the same month last year, down from 3.2% in October. Rising energy costs, which have plummeted in recent weeks, pushed the CPI up to 3.7% in the summer.
The Commerce Department on Friday will release November data on household spending, income and the Fed's recommended inflation measure.
What is not clear is when interest rate cuts will finally begin. According to futures, the first rate cut could come in March. But Fed officials have been trying to give excited markets a reality check.
“We're not really talking about cutting rates,” New York Fed President Williams recently told CNBC.
Chicago Fed President Austan Goolsby told CBS on Sunday that inflation remains above target and “counting chickens is an overstatement.”
The overall economy remains remarkably resilient, and although it has slowed since the summer, it has not fallen off a cliff.
Some think the strength of the U.S. economy may have further complicated the Fed's job of reining in inflation. However, price increases continued to slow after the summer.
The Atlanta Fed now expects gross domestic product (GDP) to grow 2.7% in the fourth quarter, slowing the pace of growth compared to the previous three months but still showing solid growth. There is.
With the U.S. economy showing resilience in the face of the highest interest rates in 22 years, the Fed may be on its way to accomplishing the historically difficult task of reining in inflation without raising unemployment. There are growing expectations that this will happen.
“It seems likely that the U.S. economy will experience an unlikely 'soft landing' next year,” John Min, chief economist at Monex USA, wrote in a recent note.
The number of new applications for unemployment aid, typically an early sign of changes in the job market, remains low. Unemployment claims rose last week, but lower than economists expected.
There were 205,000 new jobless claims for the week ending December 16th. That's an increase of 2,000 cases from the previous week's upwardly revised total of 203,000, the Labor Department said in a separate report Thursday.
Still, many financial hurdles lie ahead. Americans continue to accumulate debt while drawing down pandemic savings. Nearly 9 million Americans missed their first student loan payment after pandemic-related suspensions ended this fall.