The US economy grew by a bigger-than-expected 5.2% in the third quarter of 2023, supported by fixed investment and government spending as growth in consumer spending was revised downwards.
While the revised figures from the Bureau of Economic Analysis (BEA), up from an advance reading of 4.9%, came in higher than the 5% expected by the market, they are not expected to alter the view that the Federal Reserve has completed its rate-hiking cycle.
"The update primarily reflected upward revisions to nonresidential fixed investment and state and local government spending that were partly offset by a downward revision to consumer spending," the BEA said in a release.
"The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, residential fixed investment, and non-residential fixed investment.”
The higher second GDP reading highlights the strength of the US economy, commented John Leiper, chief investment officer at Titan Asset Management.
“Whilst we expect the Q4 number to decline, to the 1.5% - 2% region, that will do little to dent a strong year for the US economy,” Leiper said.
“The small decline in the Fed’s preferred measure of inflation, the core PCE price index, to 2.3% will be interpreted by the Fed as a sign that their strategy remains on track and they may well achieve that soft landing scenario. Markets will interpret this in a positive fashion as the Goldilocks narrative continues for now.”
US GDP has grown for five quarters in succession.
Contact the author at stephen.gunnion@proactiveinvestors.com