The US economy grew faster than previously thought in the third quarter, a sign that the Fed’s battle to cool the economy to fight inflation is having only a limited impact.
The Commerce Department’s latest reading Thursday morning showed that gross domestic product, the broadest measure of the US economy, grew at an annual pace of 3.2% between July and September. That was higher than the 2.9% estimate a month earlier. Economists polled by Refinitiv expected GDP to remain unchanged from the previous reading.
The stronger-than-expected reading was due to increases in exports and consumer spending, which were partially offset by a decline in spending on new housing, the report said. Consumer spending is responsible for more than two-thirds of a country’s economic activity.
US stocks fell on Thursday on concerns that a stronger-than-expected gross domestic product could prompt the Federal Reserve to continue raising interest rates more than expected in 2023. The Dow Jones index lost more than 400 points, or more than 1%, while it was S&P 500 and Nasdaq indices. Both fell about 2% in late morning trading.
Fed was raise interest rates Throughout the year to calm the demand for goods and services and reduce inflation. Economists have been concerned for some time that the Fed’s actions might tip the US economy into it Recession Next year.
Inflation cooled In recent readings, however, the US economy has remained strong. Some surveys released this week suggest that higher Fed rates are not slowing business or consumer spending.
newly Survey of Chief Financial Officers It found that the current level of interest rates did not affect their spending plans. And the Consumer confidence December improved according to a survey by the Conference Board, reaching the highest level since April.
A separate Labor Department report on Thursday showed that jobless claims remained relatively unchanged.
Initial weekly claims for unemployment insurance benefits rose to 216,000 for the week ending Dec. 17. The previous week’s total was revised up by 3,000 to 214,000.
Economists had expected initial claims to the land at 222,000, according to Refinitiv.
Weekly initial claims totals hover around pre-pandemic levels. In 2019, the average weekly claims were 218,000.
Continuing claims, which includes people who collect benefits on an ongoing basis, fell slightly to 1.672 million for the week ending Dec. 10. The number of continuing claims for the previous week was revised down to 1.678 million.
Mortgage rates, meanwhile, fell again last week — the sixth week in a row — with the average 30-year fixed-rate mortgage falling to 6.27% from 6.31% the week before, according to Freddie Mac. A year ago at this time, the 30-year mortgage had a fixed interest rate of 3.05%.
“Prices have fallen significantly over the past six weeks, which is beneficial for potential homebuyers,” said Sam Khater, chief economist at Freddie Mac.
The final GDP report is one of the most retrospective readings the government has released, looking at the state of the economy for nearly three months. Current forecasts from economists indicate that growth in the current period will be only 2.4%, which is much slower than Thursday’s reading.
– CNN’s Anna Bahni contributed to this report
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