Despite a rebound in GDP, consumer spending shows signs of slowing as inflation impacts spending behaviour.
The US economy grew by 2.6% on an annualised basis over the third quarter, slightly better than forecasts and ending the two negative quarters seen so far this year. What is notable is that consumer spending, while still positive over the quarter, came in at a 1.4% growth rate, down from the previous quarter’s 2% clip. Consumers, already hit by high inflation are possibly retrenching spending behaviour. The first two quarters’ negative numbers were driven in part by trade balances (higher imports) and this seems to have reversed in this latest print as imports came in a lot lower, boosting overall GDP along with significant contributions from government spending. There was not much in the GDP report to change the Federal Reserve’s probable move of a 75 basis point hike next month.
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