U.S. economy unexpectedly picks up speed
The U.S. economy grew at a 2.1% annualized pace in the third quarter, picking up speed from the second quarter’s 2% rate and surprising economists, who expected the Commerce Department’s second estimate to be unchanged at 1.9% on Wednesday.
The upward revision was based on stronger readings for private inventory investment, nonresidential fixed investment, and personal consumption expenditure, the Commerce Department said.
While growth has slowed from the blistering 3.1% pace recorded in 2019’s first quarter, fears of a recession are abating as low mortgage rates drive a rebound in the mortgage and housing markets. Refinancings are at a three-year high, and much of the savings borrowers get by lowering their rates get plowed into GDP in the form of spending.
While spending is being supported by an unemployment rate near 50-year lows, a slowdown in the pace of job creation along with sagging consumer confidence and stagnant wage growth are causing some economists to question how long that can continue.
Consumer spending, which accounts for almost three-fourths of the U.S. economy, was unrevised at a 2.9% in the third quarter from a year earlier, the Commerce Department said.
Federal Reserve officials voted to cut the central bank’s benchmark rate at each of their last three meetings to stimulate a slowing economy. Chairman Jerome Powell said the official outlook on the economy was positive and said the policymakers planned to keep rates steady, barring a significant development.
The Fed next meets in two weeks in Washington, D.C., for their last gathering of the year. There was nothing in the latest GDP report that would spur a change in the Fed’s outlook, using the gauge Powell described last month.
“We’re going to be watching all factors and if developments emerge that cause a material reassessment with that outlook, we would respond accordingly, but that’s what it would take: a material reassessment of our outlook,” Powell said on Oct. 30.
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