The numbers: The U.S. economy expanded at a revised 4.9% annual pace in the third quarter, a surprising burst of growth that appears to have tapered off at year’s end.
Growth of gross domestic product, the official scorecard for the economy, was reduced from a previously reported 5.2% in the government’s third estimate. It was still the biggest increase in GDP in a decade, however, excluding the pandemic years of 2020-21.
Yet while the economy is still growing, it’s cooled off quite a bit. GDP is forecast to increase by a mild 1% to 2% in the final three months of 2023.
The figures are adjusted to take inflation into account.
Key details: Consumer spending, the main engine of the economy, was not as strong as it first appeared. The increase in third-quarter outlays was lowered again to a 3.1% annual clip from an originally reported 4%.
Consumer spending represents about 70% of the economy.
Business investment, the next biggest part of the economy, expanded at a slightly stronger 2.6% pace.
Business profits, meanwhile, increased for the second quarter in a row. They rose 3.4%.
The annual rate of inflation in the third quarter was revised down to 2.6% from 2.8%. The increase in the core rate that excludes food and energy was marked down to 2% from 2.3%.
Most other figures in the report were little changed. GDP is updated twice after the initial results are published to incorporate new information not immediately available.
Big picture: Higher interest rates have squeezed the economy. Consumers are buying fewer big-ticket items and businesses are investing less. Hiring has also slowed.
There’s no sign of recession, however. The strength of the labor market has fueled consumer spending to keep the economy forging ahead.
Looking ahead: “Nothing here was sufficient to change the economy’s overall trajectory nor the expectation that growth slowed in the fourth quarter,” said chief economist Joshua Shapiro of MFR Inc.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open higher in Thursday trading.
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