According to data released on Thursday by the United States Department of Commerce ' s Bureau of Economic Analysis, driven by strong consumption spending, the United States ' first reading of gross domestic product (GDP) in the three quarters was 4.9 per cent, up from the fourth quarter of 2021. The market is expected to grow at a rate of 4.7 per cent, compared to 2.1 per cent.
James Earthy, the chief investment officer of BBAE, said to first-hand financial reporters that strong GDP data increases the Fed’s probability of further interest rate hikes, but he is not worried. GDP growth is a lag indicator, representing what has happened. However, there are indications that the quality of consumer credit is weakening. This means that many of the Fed ' s actions over the past year will begin to show results over the next six months.
Data show that, despite high interest rates, inflationary pressures and pressure from other factors, the United States economy grew at a much faster pace in the third quarter than in the second quarter, influenced by consumer spending, stock growth, exports, residential investment and government spending, the latest sign of the economy ' s resilience.
Compared to the second quarter, the growth in real GDP in the third quarter reflected the acceleration of consumer spending, private stock investment and federal government expenditure, as well as an increase in exports and fixed investment in housing. These changes were partly offset by a decline in non-residential fixed investment and a slowdown in State and local government expenditure in the United States. Imports show an upward trend. Among them, consumer spending increased by 4 per cent in the third quarter, well above the level of 0.8 per cent in the second quarter and contributed 2.7 percentage points to overall GDP. Consumer spending was generally balanced between goods and services, with growth rates of 4.8 per cent and 3.6 per cent, respectively.
Consumer spending in the United States exceeded expectations, despite the reversal of the United States debt yield curve, which warned of the recession. Gi Joon-ry stated that in recent years, the yield curve had been upside-down, as it had forecast every economic downturn since the 1950s. He claims that economics is a social science and not an exact mathematical science. Conditions for economic recession are not yet in place. Gi Joon-ry also stated that, although the Fed had not managed to contain inflation a few years earlier, it had done well in achieving a soft economic landing.
With the publication of GDP data, the 10-year United States debt return fell by more than 10 basis points on Thursday, at 4.847 per cent, but is still close to 5 per cent.
Federal Reserve Chairman Powell stated last week in New York that the current rise in bond yields is contributing to a tightening of financial conditions, while rising borrowing costs may be a substitute for further Fed interest rates. However, he also indicated that additional evidence of economic growth could further increase the risk of inflation and thus lead to further interest rates.
According to a report sent by the Bank of Rich Countries to the First Financial Journalist, the Bank’s economist team believes that, while continued strong demand may have prevented inflation from falling, GDP data this time do not have much impact on Fed policy, and the Fed is expected to maintain interest rates at next week’s meeting. According to Michael Arone, the latest GDP data confirm the known fact that consumers are shopping wildly in the third quarter. The report would not change the monetary policy prospects of the Fed and was the reason why the market had not reacted excessively.
According to the CME Federal Reserve Observation Tool, the market expects the Fed to rise to 79.8 per cent at the November policy meeting on the basis of the probability of not moving at 99.4 per cent, while the December meeting continues to rise to 79.8 per cent.
On the United States share side, as investors weigh their GDP data, it continues to fall on Thursday, with three full-line points falling, of which a 1.76 per cent drop in the sub-indicator, further falling into the reverse zone. Gi Joon-ry, however, continues to see the end of the year in the U.S. stock. In his view, the United States share was less likely to fall in terms of both its consumption intensity and its labour market.