December 7, 2023

Taylor Daily Press

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The US economy is running at full speed

The US economy is running at full speed

The US economy grew stronger in the third quarter than economists had expected. With annual growth of 4.9 percent, the US posted its fastest quarterly growth in nearly two years.

Why it matters: To keep inflation under control, the US Federal Reserve (Fed) raised interest rates from 5.25 to 5.5 percent. This makes borrowing capital very expensive. For example, the demand for loans should decrease, which would slow down the economy. Now that growth is stronger than expected.

In the message: Economic growth in the United States.

Preliminary statistics from the Bureau of Economic Analysis

  • In the third quarter of this year, the US economy grew according to preliminary figures 4.9 percent per annum. Economists on average expect growth of 4.3 percent.
  • Stronger-than-expected consumer spending is seen as the driving force behind growth.
  • In comparison, growth was only 2.1 percent last quarter.

Student loans

  • Eric Winograd, director of developed markets at AllianceBernstein, explains the statistics Financial Times. “The underlying story is one of a resilient consumer supported by a strong labor market. As long as consumers are strong, the overall economy is strong.
  • Consumer spending rose 4 percent from 0.8 percent in the previous quarter.
  • Tom Simons, an economist at Jefferies, sees this growth further under reservation. Since the school year restarted, American students have had to pay back their student loans. US President Joe Biden was able to suspend it for three years (at 0 percent interest rates), but that is now coming to an end. So many students have to pay back the capital consumed.
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  • Next week, the central bank’s board members will meet again to discuss interest rates. Despite strong economic growth, it is not expected to increase further.
    • It has already been stated several times that the central bank will no longer raise interest rates, but will “keep them high for a long time.”
    • Also, policy makers need to assess the consequences of previous decisions. Long-term bonds were sold as a result of previous interest rate hikes.

Please note: These are provisional figures. This figure will be revised again at the end of next month. We will get the final result in December.