The US economy experienced a significant increase in real GDP growth during the third quarter, surpassing the rates seen in the first and second quarters of the year. According to the advance estimate from the Bureau of Economic Analysis, real GDP rose at an annualized rate of 4.9%, exceeding the forecast of 4.3%. This growth was driven by increases in consumer spending, private inventory investment, exports, government spending, and residential fixed investment.
The Biden Administration celebrated this robust economic growth, highlighting consumer spending and manufacturing investments as supporting factors. They emphasized that the economy is growing from the middle out and the bottom up, rather than top-down. However, some experts caution that the strong momentum may not be sustained. Gregory Daco, EY chief economist, pointed out potential challenges such as cost fatigue, rising debt servicing costs, and slowing job growth, which could impact consumers and businesses. Daco also highlighted the broad-based pullback in business equipment investment as a cautionary tale.
While the advance estimate and the results for the first two quarters show strong GDP growth, there are concerns about a potential recession. The Conference Board predicts a mild downturn in early 2024, and Larry Adam of Raymond James expects slower growth over the next nine months, leading to a mild recession. These predictions are based on increasing headwinds faced by consumers.
However, it is worth noting that the chance of a recession, based on the average forecast among economists surveyed by Bankrate, has declined from 65% in the third quarter of 2022 to 46% in the third quarter of this year. This suggests a more optimistic outlook among economists regarding the possibility of a recession.
In conclusion, the US economy saw strong GDP growth in the third quarter, outperforming the previous two quarters. While concerns about a potential recession persist, there is a range of opinions among experts, with some predicting a mild downturn and others expressing a more optimistic outlook. The overall economic picture remains complex, and it will be important to monitor key indicators and trends to gain a clearer understanding of the future trajectory of the US economy.