The US economy expanded at a remarkably strong pace in the third quarter, despite interest rates at their highest level in 22 years.
Gross domestic product, a measure of all goods and services produced in the economy, grew at an annualized 4.9% rate in the third quarter, the Commerce Department reported Thursday. GDP is adjusted for inflation and seasonal swings.
That’s well above the second quarter’s 2.1% pace and faster than economists’ expectations of a 4.3% rate.
Robust consumer spending fueled growth in the third quarter, a sign of the economy’s surprising resilience in the face of tougher borrowing costs and persistently high inflation. Spending grew from July through September by an annualized rate of 4%, its strongest pace since the fourth quarter of 2021. Americans splurged both on goods and services.
US GDP expanded in the July-through-September period at its fastest pace in nearly two years, defying expectations in the aftermath of the spring banking crisis that the US economy would slip into recession by now. Not only have US consumers continued to open up their wallets, but other parts of the economy are also displaying some resilience.
Residential fixed investment, which reflects conditions in the housing market, advanced at a 3.9% annualized rate in the third quarter, Thursday’s GDP report showed. That’s the first time that component contributed to growth in more than two years.
Still, that strength isn’t expected to continue as the economy faces a number of headwinds, including soaring bond yields and the resumption of student loan repayments.
That expectation bodes well for the Federal Reserve, which has raised interest rates 11 times since March 2022 to slow the economy to defeat inflation. A 12th rate hike remains on the table, possibly in December, but the economy’s resilience could keep rates higher for longer.
The third-quarter GDP report also showed that business spending — known as nonresidential fixed investment — declined 0.1% in the third quarter.
This story is developing and will be updated.
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