According to forecasters' estimates, as Americans increase spending and shrug off concerns about an economic slowdown, the US economic growth rate significantly accelerated in the third quarter.
--Economists surveyed by The Wall Street Journal estimate that after adjusting for seasonal and inflation factors, the gross domestic product (GDP) grew at an annualized rate of 4.7% in the third quarter; This will be more than twice the 2.1% increase in the second quarter.
--This resilience may soon face a test. The increasing long-term interest rates, the wars between Russia and Ukraine, Israel and Kazakhstan, labor strikes, and the possible partial shutdown of the US government can all lead to economic problems.
--The US Department of Commerce is scheduled to release the initial GDP data for the third quarter at 8:30 am Eastern Time on Thursday.
Active consumer spending
The US economic growth data is much stronger than economists had expected a few months ago. Economists predicted in April that the US economy would contract slightly this summer. But by July, they expect the US economy to grow slightly in the third quarter.
The idea at the time was that the series of interest rate hikes taken by the Federal Reserve to curb inflation would lead to a stagnation of economic growth during the summer. The reality is that the foundation of the US economy remains solid.
What is the reason? Americans have increased their spending.
During the summer of this year, Americans were enthusiastic about spending on high-end concerts and movies. On the whole, their continuous consumption has been supported by two factors, one is the strong labor market, and the other is that the US government relief and locked low mortgage interest rates during the COVID-19 epidemic increased residents' savings.
Deutsche Bank Chief US Economist Matthew Luzzetti said that initially expected consumer spending power to be largely driven by special factors in early summer, but the latest data shows that this situation has persisted for a longer time.
Soft landing scenario
Employers continue to rapidly increase job opportunities and wages, while the unemployment rate remains near historical lows.
Meanwhile, the inflation rate has significantly decreased from its recent peak of 9.1% in June 2022. In response to high inflation, the Federal Reserve raised its benchmark federal funds rate range to 5.25% -5.5% in July this year, setting a 22-year high. Federal Reserve officials held interest rates unchanged at their September meeting and hinted that they may once again remain silent at next week's meeting. They argue that the progress in reducing inflation and the rise in longer-term yields are potential reasons for the continued suspension of interest rate hikes. The rise in long-term returns essentially played a role in tightening financial conditions.
The slowdown in inflation, coupled with the resilience of the economy, has sparked hopes that the US economy will achieve a soft landing, with inflation falling back to near the Federal Reserve's target of 2% without a recession.
Bill Adams, chief economist of Comerica Bank, said: "In my opinion, the US economy may have passed the hardest period in the process of normalization after the COVID-19 epidemic."
Will the economy slow down in the future?
Although some forecasters have lowered their expectations for the probability of a recession in the US economy, many still expect economic growth to slow down as Americans cope with various economic obstacles.
The rise in long-term interest rates may lead to a cooling down in multiple economic sectors.
As mortgage rates climb to nearly 8%, the highest level since mid-2000, and drag down housing demand, residential investment, which has been weak for most of this year, may further weaken.
According to a September survey by the National Federation of Independent Business in the United States, the number of small businesses surveyed who found it difficult to obtain credit has slightly increased. This may indicate a decline in corporate investment and recruitment activities.
The rise in interest rates has made it more expensive for Americans to use credit cards and other forms of borrowing, which may encourage consumers to curb spending. If consumers continue to withdraw their savings and resume paying for federal student loans, their shopping buffer space will decrease. The prolonged wars in the Middle East and labor strikes in the United States may push up energy and car prices, thereby putting upward pressure on inflation, which will erode Americans' purchasing power.
If consumer spending, which accounts for the majority of US economic output, slows down, it will drag down overall economic growth.
If consumer growth maintains such a strong momentum in the fourth quarter, it would be very surprising, "said Andrew Hunter, Deputy Chief US Economist at Capital Economics. The rise in interest rates and various other unfavorable factors may start to have a greater negative impact