Consumers Power U.S. GDP Growth In Third Quarter

Brian Turner
26 Oct, 2023
New York City

The U.S. economy expanded at an annual pace of 4.9% in the third quarter, faster than 2.1% in the second quarter, and at the fastest pace since the fourth quarter of 2021.

The economy managed to accelerate its expansion despite the Federal Reserve's efforts to cool the economy by increasing its short-term benchmark rate to a 22-year high near 5.5%.

The increases in consumer spending, exports, business investment in inventories, government spending at all levels, and residential fixed investment were partly offset by a decline in nonresidential fixed investment.

The economy's total output of goods and services was kicked into higher gear after consumers accelerated their spending on high-ticket items, from cars to travel and restaurant meals.

Consumer spending accelerated to 4% from 0.8% in the second quarter, the Commerce Department noted in the report released Thursday.

International trade also contributed to the growth story after exports rebounded 6.2% from the decline of 9.3% in the second quarter, and imports also increased by 5.6% compared to a decline of 7.6%, respectively.

Residential investment increased for the first time in nearly two years and rose 3.9% from the decline of 2.2% in the previous quarter.

On the other hand, nonresidential fixed investment declined for the first time in two years by an annual pace of 0.1% from the increase of 7.4% in the second quarter.

Government spending rose at a faster annual pace of 4.6% from 3.3% in the second quarter.

The breakneck pace of economic expansion is expected to cool in the current quarter after the economy adjusts to the Federal Reserve's short-term rate hikes and elevated long-term borrowing rates begin to cool consumer and business spending.