WASHINGTON – The U.S. economy grew at an annual rate of 4.9% between July and September as U.S. consumers braved higher prices, rising interest rates and widespread expectations of a spending slump at a faster pace.
The Commerce Department reported that the economy expanded in the third quarter at the fastest pace in nearly two years — and more than double the annual rate of 2.1% in the previous quarter.
Thursday’s report on the country’s gross domestic product — the total production of goods and services — showed that consumers led the acceleration, increasing their spending on everything from cars to restaurant meals.
Although painful inflation in the past two years has affected many people’s outlook on the economy, millions are still willing to spend money on vacations and tickets to concerts and sporting events.
However, strong growth in the third quarter may mark a peak for the US economy before a steady slowdown begins in the current October-December quarter and extends into 2024.
The rapid pace is expected to slow as higher interest rates on long-term borrowing, combined with higher short-term interest rates from the Federal Reserve, curb business and consumer spending.
Third-quarter growth numbers revealed that federal, state and municipal governments increased spending and companies built inventories of products in warehouses and shelves, which helped drive growth.
Economists warn that the rise in inventories, which accounted for about a quarter of growth in the July-September period, is unlikely to be repeated in the coming months.
The economy accelerated in the third quarter despite the Federal Reserve’s efforts to curb growth and inflation by raising its benchmark short-term interest rate to about 5.4%, its highest level in 22 years.
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