Yesterday, 01:22 PM
Did the Fed pull off a rare "soft landing?"
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Gross domestic product, which measures all the goods and services produced in the economy, expanded at an annualized rate of 2.8% in the third quarter, the Commerce Department said Wednesday. That’s a slightly weaker pace than the second quarter’s 3% rate and above the 2.6% rate economists projected in a FactSet poll. GDP is adjusted for seasonal swings and inflation.
Wednesday’s report comes after earlier data showed the economy added a whopping 254,000 jobs in September, inflation is a whisper away from the Federal Reserve’s 2% target and consumer confidence jumped this month by the fastest clip since March 2021, according to The Conference Board — all signs of a robust economy.
Despite all that, consumer moods remain gloomier than in pre-pandemic times, according to surveys. One popular explanation for that paradox is simply that price levels are now much higher than what they were in 2019 before the pandemic. While the Fed’s aggressive action to slow that inflation has pulled down the pace of price increases since reaching a four-decade peak in 2022, the lingering trauma of high inflation remains.
Regardless, American shoppers continued to fuel economic growth in the third quarter with their spending, according to Wednesday’s GDP report. That marked by far the biggest contributor to growth in the third quarter. Consumer spending accounts for about 70% of economic output. Spending accelerated sharply in the third quarter, driven by purchases of big-ticket items, while spending on services eased a bit.
Businesses continued to invest during the July-through-September period, though at a slightly softer pace than earlier in the year. Government spending at both the federal and state level also contributed to third-quarter growth.
The Fed slashed interest rates in September for the first time in more than four years, by a bold half point. It was a sign that Fed officials felt confident enough that inflation had come under control just enough to begin paring back rates to shift more attention to the job market. The Fed is tasked by Congress to stabilize prices and maximize employment through its interest rate policy.
The International Monetary Fund expects US GDP to expand at an annualized 2.5% rate in the fourth quarter, higher than the IMF’s July forecast. That would be the strongest among the Group of Seven major advanced economies.
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Gross domestic product, which measures all the goods and services produced in the economy, expanded at an annualized rate of 2.8% in the third quarter, the Commerce Department said Wednesday. That’s a slightly weaker pace than the second quarter’s 3% rate and above the 2.6% rate economists projected in a FactSet poll. GDP is adjusted for seasonal swings and inflation.
Wednesday’s report comes after earlier data showed the economy added a whopping 254,000 jobs in September, inflation is a whisper away from the Federal Reserve’s 2% target and consumer confidence jumped this month by the fastest clip since March 2021, according to The Conference Board — all signs of a robust economy.
Despite all that, consumer moods remain gloomier than in pre-pandemic times, according to surveys. One popular explanation for that paradox is simply that price levels are now much higher than what they were in 2019 before the pandemic. While the Fed’s aggressive action to slow that inflation has pulled down the pace of price increases since reaching a four-decade peak in 2022, the lingering trauma of high inflation remains.
Regardless, American shoppers continued to fuel economic growth in the third quarter with their spending, according to Wednesday’s GDP report. That marked by far the biggest contributor to growth in the third quarter. Consumer spending accounts for about 70% of economic output. Spending accelerated sharply in the third quarter, driven by purchases of big-ticket items, while spending on services eased a bit.
Businesses continued to invest during the July-through-September period, though at a slightly softer pace than earlier in the year. Government spending at both the federal and state level also contributed to third-quarter growth.
The Fed slashed interest rates in September for the first time in more than four years, by a bold half point. It was a sign that Fed officials felt confident enough that inflation had come under control just enough to begin paring back rates to shift more attention to the job market. The Fed is tasked by Congress to stabilize prices and maximize employment through its interest rate policy.
The International Monetary Fund expects US GDP to expand at an annualized 2.5% rate in the fourth quarter, higher than the IMF’s July forecast. That would be the strongest among the Group of Seven major advanced economies.