America’s Economy Keeps Defying Expectations
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Against the Grain
Many economists and market watchers started the year expecting an economic downturn as high inflation, and high interest rates, threatened to weigh on consumer spending and investments. But so far, they’ve been rather wrong.
Despite these ongoing headwinds, as well as geopolitical upheaval, the U.S. economy has stayed the course – and then some.
Stats Over Speculations
We will only get the U.S. economy’s third quarter report card tomorrow morning, but expectations look buoyant.
The Federal Reserve Bank of Atlanta pushed its Q3 growth projections to 5.4%, consulting firm High Frequency Economics nudged its predictions up to 4.6%, and Goldman Sachs (GS) elevated its growth estimates for the third quarter to 4% from a prior 3.7%.
What’s inspiring this optimism? Inflation has come off its peak, with consumer price inflation sitting at 3.7% year-over-year in September, a stark contrast from its 9% peak last year. Higher prices across the board have buoyed sales numbers as Americans didn’t stop spending in spite of economists’ worries.
The strong labor market is certainly helping on that front: In September, the job market blew past estimates, adding 336,000 jobs and recording a historically low unemployment rate of 3.8%.
So we’ve avoided a recession to this point. Yay! What’s next?
We don’t have a crystal ball either. Robust growth could be a brief flare. Year-over-year weekly wages saw their first decline since May, which could hurt consumer spending if it becomes a trend. On the flip side, the economy could still overheat, reigniting inflation, and hampering spending.
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