According to the advance estimate released today by the Bureau of Economic Analysis, U.S. Gross Domestic Product expanded in the third quarter at an annualized rate of 4.9%. That’s ahead of forecasts and at the fastest rate of growth since the stimulus-fueled quarters of 2021. Areas of strength in the quarter included Personal Consumption Expenditures on Services, which rose at a 3.6% rate; Personal Consumption Expenditures on Durable Goods, which rose at a 7.6% rate; Investment into Intellectual Property Products, which advanced at a rate of 2.6%; Exports, which climbed at a 6.2% rate; and Government Spending, which rose 4.6%. Inventories also increased. Segments of the economy that struggled or worked against GDP growth included Investment into Equipment (down 3.8%) and Imports (up 5.7%). The GDP report also contains data on inflation. The PCE Price Index increased 2.9% in the third quarter, compared with an increase of 2.5% in the second quarter. Excluding food and energy prices, the PCE Price Index increased 2.4%, compared with an increase of 3.7% in the previous quarter. In our view, the report this morning indicates that the consumer sector remains a strong driver of overall GDP, even in the wake of the Federal Reserve’s rate-hike campaign. But we do expect the higher rates will soon have an impact on the consumer. Our forecasts for the next few quarters call for slower GDP growth as the benchmark government 10-year yield hovers around 5.0% and 30-year mortgage rates top 8.0%.
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