- According to the Commerce Department, U.S. GDP rose 4.9 percent in the third quarter
- This is the highest growth in almost two years – fueled by consumer spending
The U.S. economy grew at its fastest pace in nearly two years last quarter thanks to a surge in consumer spending.
According to preliminary figures released by the Commerce Department on Thursday, gross domestic product rose 4.9 percent annually from July to September.
That was up from 2.1 percent in the second quarter and the largest growth since the fourth quarter of 2021.
Consumer spending rose 4 percent, compared to just 0.8 percent last quarter. So far, Americans have defied analysts’ expectations of a recession by maintaining high spending.
This summer they spent record-breaking amounts on blockbuster films and concert tours, including Taylor Swift’s Eras Tour and the Barbie film starring Margot Robbie.
Gross domestic product grew at an annual rate of 4.9 percent in the third quarter, Commerce Department figures showed on Thursday
Thursday’s data comes two weeks before the Federal Reserve’s next policy meeting, where it will decide whether to adjust interest rates.
High consumer spending has led to inflation that has proven difficult for authorities to contain, despite relentless interest rate hikes intended to raise borrowing costs.
The Fed is now expected to keep interest rates at their 22-year high between 5.25 and 5.5 percent.
“The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal spending and residential fixed investment, partially offset by a decrease in nonresidential fixed investment,” the Commerce Department said.
Most U.S. stocks opened lower on Thursday. The Nasdaq index fell around 0.4 percent at the market open, while the S&P 500 fell 0.2 percent.
Consumers splurged on record-breaking blockbuster films and concert tours this summer, including Taylor Swift’s Eras Tour and Margot Robbie’s Barbie
Spending growth in the third quarter was preceded earlier this month by strong employment growth in September – an overall indication of economic strength. The U.S. economy added 336,000 jobs last month, nearly double economists’ expectations of 170,000.
On Thursday, new data from the Labor Department suggested that initial jobless claims increased but were still low across the system, increasing by 10,000 to 210,000.
But while spending appears to be strong, other signs suggest the boom may soon be coming to an end.
Mastercard shares fell on Thursday following its third-quarter earnings report, in which the company signaled that spending had declined so far in October.
Therefore, weaker than expected net sales growth is forecast for the fourth quarter.