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The third quarter likely saw strong economic growth, which sounds like good news -- unless you're rooting for lower interest rates.
The Federal Reserve might eventually get the slowdown it wants to open the door to lowering interest rates, but not before another quarter of too-hot growth data for Q3, Bloomberg reported.
No Longer in a Material World
Third-quarter gross domestic product is projected to have grown at an annual rate of 4.5% when figures are announced on Thursday, the fastest pace since the end of 2021, Bloomberg projected. This was driven mainly by a strong job market and high consumer spending.
During the pandemic, cooped-up Americans bought everything from TVs to washing machines to Nintendo Switch consoles. But US consumers shifted to "experience" buying as the world opened back up. The Taylor Swift and Beyonce concert tours, plus the theatrical runs of Barbie and Oppenhiemer, added roughly $8.5 billion to US growth. This isn't to say consumer spending and GDP growth will continue to climb:
- Fed Chair Jerome Powell recently said Q3's boom was somewhat expected and that the economy should begin to slow in the last three months of 2023. Economists surveyed by Bloomberg predict GDP will expand at an annual rate of just 0.7% in Q4.
- There are plenty of factors that could contribute to a slowdown -- resumption of student loan payments, the auto workers' strike, the spread of war in the Middle East, and another possible government shutdown next month, to name just a few.
Biden v. Powell: President Joe Biden has been trying to channel the old adage of "It's the economy, stupid" while highlighting his economic policies amid a reelection campaign. He can try to point to recent stimulus packages and the sustained run of high consumer spending and argue, "Hey, man, Bidenomics must be working." But the still-high inflation that comes with all that spending is causing growing pains for Powell and Co.