Robust Growth in Q3 2023

Official data released on Thursday paints a picture of a thriving U.S. economy in the third quarter of 2023. The main drivers of this economic upswing were consumer spending and a robust job market, significantly reducing the likelihood of a 2024 recession.

Impressive GDP Growth

The Commerce Department’s data reveals that the Gross Domestic Product (GDP) surged at an annual rate of 4.9% during the July-September period, a substantial improvement from the previous quarter’s 2.1%. Notably, this surpassed analysts’ expectations of 4.5%, as reported by the BBC.

Key Contributors to Growth

This remarkable growth is attributed to “accelerations in consumer spending, private inventory investment, and federal government spending,” among other factors, according to the US Bureau of Economic Analysis.

Inflation Concerns Easing

The Personal Consumption Expenditures Price Index, commonly used by the Federal Reserve to assess near-term inflation risks, stood at 3.5% for the quarter. Meanwhile, the core PCE deflator, excluding food and energy prices, slowed down to 2.4%. This represents the lowest level since the last quarter of 2019, potentially alleviating concerns about future interest rate hikes.

Consumer Spending and Strong Demand

The Commerce Department’s data highlights that consumer spending played a pivotal role, contributing 2.7 percentage points to the 4.9% growth. An unexpected increase in corporate inventories, a sign of strong near-term demand, added another 1.3 percentage points.

Positive News for Bond Markets

The Labor Department reported that the number of Americans applying for new unemployment benefits increased by 10,000 to 210,000 in the week ending on October 21, as per TheStreet’s report. This positive trend in the labor market had a ripple effect in the bond markets.

Falling Treasury Yields

US Treasury yields have declined, with the 10-year yield dropping to 4.89% and the 2-year yield decreasing to 5.04%. The CME Group’s FedWatch tool, tracking investors’ expectations of near-term interest rate changes, shows a 98.2% probability that the Fed will maintain rates between 5.25% and 5.5% at its upcoming policy meeting in Washington.

Global Economic Implications

Economists from Bloomberg, as reported by CryptoGlobe, have considered the potential global economic consequences of the ongoing conflict between Israel and Hamas. This conflict has the potential to trigger a global recession, particularly if it escalates.

Investor Advice

Well-known market analyst Jim Cramer, host of CNBC’s “Mad Money,” has suggested that investors may want to hold off on buying assets until interest rates rise again. He believes that an ensuing sell-off could lead to lower prices.