WASHINGTON, Nov 29 (Reuters) – The U.S. economy grew faster than initially estimated in the third quarter, but momentum appears to have slowed since then as higher borrowing costs curb hiring and spending.
Gross domestic product rose 5.2% on an annual basis last quarter, up from the 4.9% previously reported, the Commerce Department’s Bureau of Economic Analysis said in its second estimate of third-quarter GDP. It was the fastest pace of expansion since the fourth quarter of 2021.
Economists polled by Reuters had expected GDP growth to rise to a rate of 5.0%. The economy grew at a pace of 2.1% in the April-June quarter, growing at a rate well above what Federal Reserve officials consider a noninflationary growth rate of about 1.8%.
The upward revision to growth last quarter reflected improvements in business investment and at the state and local levels
Government spending. Housing investment was also revised upwards, as was private storage investment. However, growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, moderated to a still-solid 3.6%. An increase of 4.0% was previously expected.
Consumer spending appears to have cooled significantly at the start of the fourth quarter, and retail sales fell in October for the first time in seven months. The labor market is also relaxing. Job growth slowed last month and the unemployment rate rose to a near two-year high of 3.9%.
Slowing demand has raised optimism that the Federal Reserve is likely done raising interest rates this cycle, with financial markets even expecting a rate cut in mid-2024.
Since March 2022, the US Federal Reserve has raised its key overnight interest rate by 525 basis points to the current 5.25% to 5.50%.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
Our standards: The Thomson Reuters Trust Principles.
Purchase license rights