US Economy Grows at 5.2% Annual Rate in Q3, Despite Higher Interest Rates

According to Yahoo News, the US economy experienced a 5.2% annual growth rate from July to September, as reported by the government on Wednesday. This is an upgrade from the previous estimate of a 4.9% annual rate. The second estimate confirms that the economy accelerated significantly from its 2.1% rate between April and June, marking the fastest quarterly growth rate in nearly two years. Consumer spending, which is crucial to the economy, increased at a 3.6% annual rate during the third quarter. Although this is a downgrade from the previous estimate of 4%, it still indicates a healthy economy. The growth was also driven by companies building inventories in anticipation of future sales, as well as increased spending and investment by federal, state, and local governments. Despite the Federal Reserve raising its benchmark interest rate 11 times since March 2022 to combat the worst inflation in four decades, the US economy has remained resilient. These higher interest rates have led to increased consumer and business borrowing costs but have also helped alleviate inflationary pressures. Consumer prices rose 3.2% last month compared to 12 months earlier, a significant improvement from the 9.1% year-over-year inflation recorded in June 2022. The US job market has cooled down from the red-hot levels of the past two years but remains healthy by historical standards. Employers have added an average of 239,000 jobs per month this year, and the unemployment rate has been below 4% for 21 consecutive months, the longest streak since the 1960s. This combination of easing inflation and resilient hiring has raised hopes that the Fed can achieve a so-called soft landing, raising rates just enough to cool the economy and control price increases without causing a recession.