The U.S. economy displayed remarkable resilience, growing at an annual rate of 2.8% from July through September, driven largely by consumer spending, despite the challenges posed by elevated interest rates. This growth, although slightly down from the 3% rate recorded in the April-June quarter, reflects a robust economic performance as Americans prepare for the final stretch of the presidential race.
GDP Growth Amid Interest Rate Hikes
According to the latest report from the Commerce Department, the gross domestic product (GDP)—the total output of goods and services—continues to reflect the U.S. economy’s surprising durability. This growth comes despite the Federal Reserve’s aggressive interest rate hikes implemented in 2022 and 2023 to combat inflation.
Many had anticipated that these heightened borrowing costs would lead the economy into a recession; however, the contrary has been observed. Employers continue to hire, and consumers remain active in their spending habits, illustrating a resilient economic landscape.
Consumer Confidence Shows Positive Trends
The Conference Board reported on Tuesday that its consumer confidence index saw its largest monthly increase since March 2021. Notably, the percentage of consumers expecting a recession in the next year fell to its lowest level since the board began tracking this sentiment in July 2022. This uptick in consumer confidence signals a continued willingness to spend, a key driver of economic growth.
Job Market Dynamics
While consumer spending remains strong, the job market is showing signs of cooling. The government reported on Tuesday that job openings in the United States fell to their lowest level since January 2021. Employers have added an average of 200,000 jobs per month this year, a healthy figure, but a decline from the record 604,000 jobs added in 2021 and 377,000 jobs in 2022.
Anticipation is building for the Labor Department’s upcoming report, expected to show the economy added 120,000 jobs in October. However, this gain is likely to be influenced by factors such as Hurricanes Helene and Milton and a strike at Boeing, which temporarily disrupted payrolls.
Federal Reserve Adjustments
In response to these economic indicators, the Federal Reserve recently cut its benchmark rate by 0.5%, the most significant reduction in over four years, signaling a proactive approach to support economic stability amid a slowing job market. The Fed is expected to announce another quarter-point cut in its upcoming meeting.
Moreover, Fed policymakers have indicated plans for additional rate cuts in their final meetings of the year in November and December, with projections for four more cuts in 2025 and two in 2026. These adjustments could lead to lower borrowing costs for consumers and businesses in the long run.
Inflation Trends and Economic Outlook
After reaching a four-decade high of 9.1% in June 2022, inflation has decreased to 2.4%, just above the Fed’s target of 2%. However, average prices remain significantly higher than pre-pandemic levels, which has caused frustration among many Americans. This economic backdrop poses a challenge for Vice President Kamala Harris in her upcoming presidential campaign against former President Donald Trump.
While mainstream economists suggest that Trump’s policy proposals could exacerbate inflation, the Biden administration continues to highlight its achievements in navigating the economic landscape.
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