US economy stronger than expected, consumer trends are key

On November 29, the US Department of Commerce released a report showing that the world's largest economy grew more than expected in the third quarter of 2023, due to higher investment and government spending than initially expected.

The US economy is 'booming' thanks to increased investment and government spending. Image of people shopping at a supermarket in California, USA. (Source: AFP)

Compared to the same period last year, US Gross Domestic Product (GDP) grew 5.2% in the third quarter of 2023, the highest level since the fourth quarter of 2021 and significantly higher than the estimated growth of 4.9% announced in October 2023.

The upward revision to the third-quarter growth figure from the previously released data was mainly due to upward revisions in nonresidential fixed investment and state and local government spending, according to the US Commerce Department.

The world's largest economy has proven stronger than expected. This comes as the Federal Reserve (Fed) has adopted a policy of rapidly raising interest rates to curb rapid inflation, leading many experts to predict a possible recession.

However, strong consumer spending, supported by a solid jobs market, has helped prevent the US economy from slipping into recession so far.

Some economic experts assess that the GDP growth rate in the third quarter of 2023 mainly reflects an increase in consumer spending and private inventory investment.

According to Ms. Rubeela Farooqi, chief economist of High Frequency Economics, consumer trends will be the key factor for US economic growth in the coming time.

"The economy will continue to grow but the pace will slow significantly in the fourth quarter of 2023, as household spending slows due to the cumulative effects of tightening monetary policy," Ms. Rubeela Farooqi forecasts.

Source