The US economy surprised again by achieving robust growth during the summer. Last week, the Department of Commerce revealed that the economy grew, during the third quarter, at an inflation-adjusted annual rate of almost 5 percent, from around 2 percent in the previous quarter. The main protagonists of this vigorous expansion were the persevering consumers, who increased spending mainly on services during the third quarter, at an annual rate of 4 percent. The other main contribution was made by businesses increasing inventories, which contributed over 1 percent to summer growth.
The strong job creation of more than half a million new jobs in August and September, together with the just revealed growth figures, both defy conventional models. Since inflation has slowed down, thanks to central bank interest rate increases, from a peak of 7.1 percent, reached during the summer of 2022, to around 3 percent last September.
The key question, as described by Federal Reserve Chairman Jerome Powell, is if this vigorous performance of job creation and economic growth threaten the ability to push back inflation to the 2 percent objective. The answer to this question may be known after the end of this week’s meeting of the central bank.
