Surprising Strength in US Economy: 3rd Quarter GDP Growth Soars

by Billy Abildgaard

The US economy has delivered an unexpected jolt of vitality with a robust 4.9% annualized growth in the third quarter, marking the fastest rate of expansion since the fourth quarter of 2021. This remarkable surge, more than double the previous quarter's 2.1% growth, was powered by resilient consumer spending, representing approximately 70% of GDP, and strong private fixed investment, which accounts for about 18% of GDP. The question on everyone's mind: Can near 5% growth be sustained? The answer is no, but it does significantly reduce the likelihood of an impending recession.

Positive Signs in Pending Home Sales

Pending home sales have shown promising signs as well. The National Association of Realtors' Pending Home Sales Index saw a 1.1% month-over-month increase, rising from 71.4 in August to 72.6 in September. This achievement becomes even more impressive when considering the backdrop of September's fluctuating mortgage rates. However, it's essential to maintain perspective, as 72.6 still lingers near 20-year lows.

Central Bankers Ease the Brakes

In the realm of central banking, there's a notable shift.

The Bank of Canada has maintained rates at 5% for the second consecutive meeting, while the European Central Bank has concluded a streak of ten consecutive rate hikes, leaving rates at 4%.

Looking ahead, both the US Federal Reserve and the Bank of England are anticipated to hold rates steady in the coming week.

Yield Respite

In a welcome development, the yield on 10-year US Treasury bonds briefly touched 5% last week, sparking a surge in buying activity. This influx of demand pushed bond prices higher, consequently lowering yields to 4.85% – a mathematical outcome. This shift also affected mortgage-backed securities, helping to bring average 30-year mortgage rates back into the high 7% range.