The US Economy Expanded by 4.9% in the Third Quarter

In the third quarter of 2023, the US economy showed a slightly slower but still vigorous growth, with GDP expanding at an annualized rate of 4.9%, a modest decline from the previously reported 5.2%. 

This performance, the strongest in nearly two years, was driven by consumer spending on entertainment and goods, even as the economy cooled from its earlier high tempo. Despite a revision in consumer spending to 3.1% from 3.6%, and adjustments in inventory investment, exports, and government spending, the economy's resilience was clear.

Investor optimism is on the rise with expectations of the Federal Reserve cutting interest rates in the coming months. The potential for rate reductions follows a period of inflationary pressure, with the Consumer Price Index (CPI) climbing to 3.1% in November, slightly down from October’s 3.2%, and peaking at 3.7% in the summer. These inflationary trends, coupled with falling energy costs, have led to a reassessment of the economic outlook.

As always, Fed’s stance remains critical. The central bank has indicated three potential rate cuts next year, aligning with the easing of inflation closer to the targeted 2%. 

Remarkably, the economy has withstood the highest interest rates in over two decades, challenging predictions of a recession. This endurance fuels hopes for a 'soft landing' where inflation is curbed without a significant rise in unemployment.

Unemployment claims, a key indicator, remain low with 205,000 initial claims in the week ending December 16, slightly above the previous week’s revised figure of 203,000.