U.S. Q3 Growth Slows as Consumer Spending, Exports Rise
The U.S. economy is cooling from a strong first half of the year, as growth slowed more rapidly than expected in the three months to September. In an initial estimate on Wednesday, the Bureau of Economic Analysis reported third-quarter Gross Domestic Product at an annual growth rate of 2.8%, a modest incline from the prior reading of 3.0% in the second quarter of the year.
The gain was primarily led by increases in consumer spending, exports, and federal government spending, while imports, which are a subtraction in the GDP calculation, also rose. This growth, nonetheless, was below expectations by economists, who had expected the third-quarter growth to remain steady at 3.0%. Following the GDP report, the gold price was little changed, with December futures settling at $2,790.90 per ounce, up 0.35% for the day. The price of the precious metal is still supported by technical momentum rather than a fundamental change in the economic landscape.
Michael Brown, Senior Research Strategist at Pepperstone, had this to say about the GDP report: “While +2.9% is a touch below expectations, the U.S. economy still has a relatively good tail wind moving into the end of Q1.”
“Although growth was marginally softer than expected, the U.S. economy is still performing robustly. This is the eighth quarter in the last nine where growth has exceeded 2%, supporting the ‘U.S. exceptionalism’ narrative,” Brown said.
He also added that there is a view that the economy is on track for a “soft landing” as the pressures of inflation continue to abate, and the Federal Reserve is apt to continue to adjust policy to be consistent with a neutral setting next summer. Consumer spending, the largest slice of GDP, rose 3.7% in the third quarter, corresponding to strong domestic demand. However, inflation continued to be put in a moderate increase by a rise in core Personal Consumption Expenditures index, which rose 2.2%, above the consensus by economists of 2.1%. Overall, the broad GDP price index also rose 1.8% in the period. This data underlines the resilience of the U.S. economy, though it probably faces a more moderate pace of growth ahead as policymakers seek to balance growth and inflation goals.