The Third Quarter GDP Boom - WSJ Editorial

[question everything]

The U.S. economy keeps on growing, and in the third quarter it positively boomed. This is good news by any measure, though it’s striking how few economists think it can keep going. Let’s hope they keep being wrong. Gross domestic product grew 4.9% after inflation in the third quarter on an annual basis. The doughty American consumer led the way, with personal consumption growing 4% and contributing about 2.7 percentage points to overall growth.

Few predicted this when the Federal Reserve began raising short-term interest rates at an unprecedented pace in spring 2022. Healthy job growth means consumers still have money to spend, and the wealth effect from this year’s rising stock market helps to buoy consumer sentiment. Perhaps some consumers are also still spending down their pandemic-era savings and transfer payments.

Also good news was the third-quarter inflation data. The Fed’s preferred index of personal-consumption-expenditure inflation, excluding food and energy, fell to 2.4% for the quarter. That’s down from 3.7% in the second quarter, and this is the first time it’s been below 3% since the end of 2020.

(snip)

Another caution signal was nearly flat fixed business investment, especially for equipment. Most of the increase in private investment came from the buildup in inventories, which can’t continue without sales. Future investment will also have to overcome the recent surge in long-term interest rates, with the 10-year Treasury yield now hovering near 5%. These rates aren’t high by historical standards, and they should lead to better investment choices. But they will have a dampening effect as businesses adjust to the new rate reality.

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[LymphocyteLover]

1. And yet the stock market is going down again

Very frustrating