The U.S. economy grew much faster than previously expected in the third quarter, suggesting the Fed’s efforts to cool the economy to fight inflation have had limited success.
Gross domestic product, the broadest measure of the U.S. economy, expanded at an annual rate of 3.2% between July and September, final data from the Commerce Department showed Thursday morning. That was up from an estimate of 2.9% a month earlier. Economists polled by Refinitiv had expected GDP to remain unchanged from the previous reading.
The stronger-than-expected reading was due to higher exports and consumer spending partially offset by lower spending on new housing, the report said. Consumer spending accounts for more than two-thirds of the nation’s economic activity.
The Federal Reserve has been raising interest rates throughout the year to reduce demand for goods and services and lower inflation. Economists have worried for a long time that the Fed’s actions could tip the U.S. economy into recession next year.
Recent data has shown that inflation has cooled, but the U.S. economy remains strong. A number of surveys released this week showed that the Fed’s rate hikes have not slowed business or consumer spending.
A recent survey of chief financial officers found that current interest rate levels have not affected their spending plans. Consumer confidence improved in December to the highest level since April, according to a survey by The Conference Board.
Additionally, employers continue to hire at historically strong rates, despite an increase in layoffs in certain industries, notably tech.
A separate report from the Labor Department on Thursday showed initial jobless claims remained relatively unchanged.
Weekly initial jobless claims edged up to 216,000 for the week ended Dec. 17. The previous week’s total was revised up 3,000 to 214,000.
Economists had expected 222,000 initial jobless claims, according to Refinitiv data.
Weekly jobless claims hovered near pre-pandemic levels. In 2019, an average of 218,000 claims were filed each week.
Continuing claims, which include those who continue to receive benefits, fell slightly to 1.672 million for the week ended Dec. 10. Continuing claims for the previous week were revised to 1.678 million.
The final GDP report is one of the most retrospective ever issued by the government, looking at the state of the economy nearly three months ago. Economists are now forecasting growth of just 2.4% for the current period, significantly lower than Thursday’s data.
Still, Wall Street is concerned that the GDP report could give the Fed more room to raise rates. Stocks fell slightly on Thursday. Dow futures fell 200 points, or 0.6%. S&P 500 futures fell 0.8%.
– CNN’s Alicia Wallace contributed to this report