Fresh growth numbers to show US still economic powerhouse

NEW YORK: The world’s largest economy probably expanded at the quickest pace in nearly two years during the third quarter on the back of a steadfast US consumer, a challenge for Federal Reserve (Fed) officials who are debating whether additional policy tightening is needed.

Gross domestic product (GDP) advanced at a 4.3% annualised pace in July to September, according to the median projection in a Bloomberg survey of economists.

Such growth illustrates that the United States remains the global economic powerhouse as Europe stagnates and Asia contends with a struggling China.

Personal consumption, the primary engine of the US economy, is projected to advance at a 4% rate.

Resilient demand is testing the policy skills of Fed officials after nearly two years of interest rate hikes. While inflation is well off its peak, price pressures are still running almost twice as fast as their goal.

Thursday’s GDP report won’t be enough to nudge the Fed towards a November rate increase, but sustained spending momentum in the fourth quarter would likely raise the prospects for additional tightening around the turn of the year.

“Additional evidence of persistently above-trend growth, or that tightness in the labour market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Fed chairman Jerome Powell said at the Economic Club of New York last Thursday.

September income and spending data on Friday will give a sense of the momentum in household demand and inflation ahead of the fourth quarter.

Forecasters see a 3.7% increase in the core personal consumption expenditures price index, which is one of the Fed’s preferred measures because it excludes often-volatile food and energy costs.

That would be the smallest annual gain since May 2021 and consistent with modest progress on inflation.

“Real third quarter (3Q) GDP likely surged to a 4.7% annualised pace with consumers accelerating their spending to an unsustainable 4.2% pace amid a frenzy of summer travel and entertainment,” said economists Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou. — Bloomberg