Quiver Quantitative - The US economy has demonstrated its most robust quarterly growth since 2021, clocking in at a commendable 4.9% annualized rate — a noteworthy leap from the previous quarter. The figures released this Thursday were a testament to a surge in consumer spending, which rocketed to 4%, marking its own peak since 2021. As the S&P 500 dipped in response, Treasury bonds experienced a rise. The inflation measure, another pivotal indicator, decelerated slightly more than anticipated, reaching its most modest rate since 2020.
Despite economic challenges such as escalating prices and a swift surge in borrowing costs, the world's dominant economy continues to surpass analysts’ predictions, effectively staving off recession apprehensions. Underpinning this economic resilience is the sustained vigor of the job market, propelling household demand. As the year edges towards its conclusion, the trajectory of economic vigor will influence the Federal Reserve's decisions on interest rate adjustments. Though a slowdown is anticipated due to factors like borrowing costs and the reintroduction of student-loan payments, persistently high demand might necessitate a stricter monetary policy.
Fed Chair Jerome Powell, while discussing the Federal Open Market Committee's rate-setting measures, emphasized a measured approach given the recent economic developments, especially the 10-year Treasury yield's jump to over 5% — a phenomenon unseen in 16 years. Meanwhile, the data released indicates that inflation continues to recede, with core personal consumption expenditures (which excludes volatile components like food and energy) easing to 2.4% in the third quarter. In contrast, the overall PCE saw a 2.9% increment.
The latest economic developments have been embraced by President Joe Biden as evidence of the "resilience of American consumers and workers," attributing this fortitude to his administration's policies. Despite this optimism, future economic projections face challenges, with potential setbacks such as labor strikes, the looming threat of a broader Middle East conflict, and a potential government shutdown. Initial jobless claims and merchandise trade deficit statistics further complicate the picture, prompting experts to advise caution in future economic prognostications.
This article was originally published on Quiver Quantitative