US Q3 GDP jumps past forecasts, inflation slows

(Sharecast News) - America's economy grew at an accelerated pace during the third quarter, bolstered by household spending, while price pressures ebbed further. According to the U.S. Department of Commerce, gross domestic product expanded at a quarterly annualised clip of 4.9% (consensus: 4.5%).

Household consumption, which accounts for the lion's share of economic activity, picked up to an annualised pace of 4.0%, having slowed to 0.8% over the three months to June.

That contributed 2.7 percentage points to the headline number for GDP growth.

Inventory growth added a further 1.3 percentage points to the rate of expansion while foreign trade subtracted one tenth of a percentage point.

Government outlays added an outsized 0.8 points to the rate of growth, alongside a contribution of just 0.2 points from fixed investment.

On the inflation front, the rate of increase in the price deflator for personal consumption expenditures slowed to 2.4% on a quarterly annualised basis (consensus: 2.5%) - the least since the fourth quarter of 2019.

Nevertheless, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics, GDP growth could be expected to be flat in the final three months of 2023.

Household's real incomes dropped at a rate of 1.0% in the third quarter on an after tax basis, having averaged 7.1% in the first half, he said.

So, Shepherdson stressed, cashflows could not support another leap in consumption in the fourth quarter.

Likewise, another spike in inventories appeared to be unlikely and surveys were signalling continued softness and housing was again worsening.