US retail sales contracted in November, with consumers spending more on essentials
Consumer spending is boosting U.S. economic growth AFP

The American economy more than doubled its pace of expansion in the third quarter as consumer spending remained strong.

Gross domestic product expanded at an annual rate of 4.9% in the three months ended in September, the Commerce Department said in a statement Thursday. It's the fastest growth since the 7% rate in the fourth quarter of 2021.

Economists surveyed by Reuters estimated 4.3%. In the second quarter, GDP grew 2.1%

This is the preliminary estimate of the third-quarter GDP. The data will be revised twice.

The report shows that consumer spending gained 4.9%, while private investment jumped 8.4%.

Fed and Growth

The personal consumption expenditure (PCE) price index, a measure of inflation favored by the Federal Reserve, rose 2.4% in the period when food and energy items are excluded. That's a slowdown from 3.7% in the second quarter and 5% a year earlier.

Fed Chair Jerome Powell said US inflation was still too high
Fed Chair Jerome Powell AFP

Federal Reserve Chair Jerome Powell said that additional interest-rate increases may be necessary as economic growth remains strong and inflation too high.

"Economic growth has consistently surprised to the upside this year, as most recently seen in the strong retail sales data released earlier this week," Powell said in a speech last week. "The record suggests that a sustainable return to our 2% inflation goal is likely to require a period of below-trend growth and some further softening in labor market conditions."

The Fed will decide whether to continue or pause interest rate hikes on Nov. 1.

Economists say U.S. growth should slow in the fourth quarter because of events such as the United Auto Workers strike and the resumption of student loan repayments.

Some executives and investors have expressed doubts about the real strength of the economy.

Billionaire investor Bill Ackman said early this week in a post on X that "the economy is slowing faster than recent data suggests." The Chief Executive Officer of Pershing Square Capital Management said the firm changed its strategy of betting against 30-year bonds.

JPMorgan, Citigroup, Wells Fargo and Bank of America alerted in their quarterly earnings reports that consumer spending is slowing.