In the third quarter of 2023, the U.S. economy grew faster than expected.
According to the Department of Commerce, the annualized Gross Domestic Product (GDP) growth was 4.9%.
Based on Projections Broadcast data, analysts had predicted a lower figure of 4.5%.
Compared to the previous quarter, this growth shows a strong acceleration. In the second quarter, the economy expanded by just 2.1%.
Hence, the recent data indicates a more robust economic performance. The Department of Commerce also reported on inflation.
The Personal Consumption Expenditures (PCE) index rose by an annualized rate of 2.9% in the third quarter.
In contrast, the PCE grew slower than 2.5% in the second quarter.
Additionally, the core PCE index, which leaves out food and energy prices, increased by 2.4% between July and September.
This is slower than the 3.7% growth seen in the quarter before. The Federal Reserve uses the PCE as its preferred method to measure inflation.
Overall, the third quarter showed promising economic and inflation figures, offering insights into the U.S. economic landscape.
Background
To understand these figures, it’s important to consider recent history. The U.S. economy faced significant challenges in 2020 due to the COVID-19 pandemic.
However, strong stimulus measures helped spur a rebound in 2021 and 2022.
Despite this, inflation became a growing concern for policymakers, leading to various adjustments in monetary policy.
The Federal Reserve has been scrutinized for managing inflation while fostering growth. Interest rates have been a key tool in this balancing act.
Low rates have encouraged spending in the past, but they can also lead to high inflation.
Therefore, the new GDP and PCE data will likely play a crucial role in upcoming Federal Reserve decisions.