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US GDP Surge 4.9% as Consumers and Government Go Large

US GDP Surge To 4.9% As Consumer and Government Spending

In a remarkable economic upturn, the US GDP Surge for the third quarter of the year surged by 4.9%, marking its swiftest growth since 2021. This impressive expansion was primarily driven by exuberant consumer and government spending.

US GDP Surge Driven by Government Spending

Household spending, a significant contributor, increased by 4%. Durable goods expenditure, which includes items with a lifespan exceeding three years, exhibited remarkable strength, soaring by 7.6%. Services, while somewhat softer at 3.6%, still demonstrated overall resilience, with icons like Taylor Swift, Beyonce, and Barbie selling out venues and spurring increased hotel bookings and restaurant and bar patronage.

Residential Investment Bounces Back

Residential investment also stood out, rising by 3.9% after a prolonged period of decline. The scarcity of available homes for sale helped trigger a resurgence in prices, subsequently revitalizing the construction sector.

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Government spending contributed significantly to the growth, registering a 4.6% annualized increase. A substantial 8% boost in defense spending played a key role, while substantial inventory buildup contributed 1.3 percentage points to the overall 4.9% US GDP Surge.

Consumer Spending Outlook

Regrettably, sustaining this remarkable growth rate in the fourth quarter appears unlikely. The cumulative effects of interest rate hikes by the Federal Reserve and diminished access to credit are starting to impact the economy. Credit card borrowing costs have reached unprecedented levels, and interest rates for car loans and personal loans are on the rise. Meanwhile, mortgage rates have climbed to 8%. Simultaneously, sources of funds available for spending are dwindling. Real household disposable income remains stagnant, savings are depleting, and consumer credit is beginning to be repaid, including student loans.

These factors lead us to anticipate a deceleration in consumer spending in the fourth quarter, with this trend expected to continue into 2024. Home builder sentiment is also showing signs of turning negative, which may undermine the outlook for residential construction in 2024. Additionally, the substantial inventory buildup witnessed in the third quarter may not be as pronounced in the fourth quarter.

US GDP Surge Growth Projections

While it is still early days, our current projection places US GDP Surge at approximately 1.5% in the final three months of the year. While not catastrophic, the challenges facing the consumer sector are likely to intensify, leading to even weaker growth in 2024.

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Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.

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