US economic growth accelerated to 4.9% in third quarter

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The US economy expanded faster than expected in the third quarter, growing at its quickest pace in almost two years in the latest sign of the country’s economic resilience in the face of high interest rates.

Strong consumer spending drove a 4.9 per cent annualised increase in gross domestic product, according to preliminary figures from the commerce department’s Bureau of Economic Analysis.

That was a jump from a 2.1 per cent rate in the second quarter, and the strongest figure since the fourth quarter of 2021. Economists on average had predicted a rate of 4.3 per cent.

The data comes as the Federal Reserve prepares for a meeting next week to decide interest rates. The central bank has been trying to use higher rates to bring inflation back towards its 2 per cent target without causing a sharp deterioration in the economy.

The GDP figures are unlikely to drastically influence next week’s decision, as they are backward-looking compared with monthly data such as inflation and payrolls.

The Fed is widely expected to hold rates steady at a 22-year high, to give policymakers more time to assess the effect of their previous rate increases and recent events such as a sharp sell-off in bond markets.

Still, the growth data provide yet another reminder of the longer-term strength of the economy and support expectations that rates will stay elevated for an extended period. Longer-dated 10- and 30-year Treasuries, which have sold off drastically in recent weeks, are particularly sensitive to growth expectations.

Strong headline GDP figures can also influence consumer and business sentiment, which can have a knock-on effect on behaviour and inflation expectations.

Some sectors of the economy have been knocked by the increase in interest rates, particularly the property sector. Sales of existing homes fell to their slowest pace in 13 years in September as mortgage rates rose.

However, consumer spending has been much more resilient than most economists had expected, with strong retail sales data earlier this week helping to briefly push the 10-year Treasury yield to a 16-year high.

Thursday’s figures are based on preliminary data. The BEA will publish a second estimate late next month, and a third figure in December.