GDP report shows US economy grew a strong 4.9% in the latest quarter as Fed mulls rate hikes

Published

2 years ago

October 31, 2023

admin

The US economy grew a stellar 4.9% from July through September, driven by robust consumer spending despite the Federal Reserve’s efforts to slow the economy with high-interest rates.

Thursday’s estimate from the Commerce Department showed that the nation’s gross domestic product — the broadest gauge of the economy’s total output of goods and services — was the fastest quarterly advance in nearly two years.

Last quarters robust GDP growth was far above the 2.1% growth rate in the April-to-June quarter.

Despite inflation, the Commerce Department reported that Americans drove the economy by stepping up their spending, splashing out on everything from movies and Taylor Swift concert tickets to restaurant meals.

However, the economy is expected to experience a steady slowdown in the current October-to-December quarter and into early 2024, especially if the Fed implements another interest rate hike and the housing market remains sluggish.

A recent survey by CNBC-Morning Consult showed just that, with more than three-quarters of respondents, 76%, saying they plan to be frugal through the holidays.

Of the 4,403 US adults polled last month, 62% said they plan on budgeting sometimes or more often in the upcoming six months, CNBC found — during retailers all-important holiday shopping season.

On top of sky-high borrowing rates currently plaguing the housing market — the average long-term rate hit 8% for the first time since 2000 last week, per Mortgage Daily News — some 30 million Americans began repaying student loans, which could slow their ability to spend in the fourth quarter.

Those loan repayments had been suspended since the pandemic first struck three years ago.

Brisk consumer spending typically leads companies those that sell physical goods as well as those, like restaurants and entertainment venues, in the economys vast service sector to raise prices, thereby fueling inflation.

Fed officials have acknowledged the pickup in growth, which could potentially undercut their efforts to fight inflation, which rose 3.7% in September.

Last month’s advance was more than economists expected — and a sharp decline from June 2022’s four-decade high of 9.1% — though it’s still well above central bankers’ 2% goal.

A blockbuster September employment report revealed that the US economy added a whopping 336,000 jobs last month an unexpected surge that contradicts the notion the Fed may tamp down its aggressive tightening regime.

However, it still remains unclear whether the latest GDP figure will have much impact on the Fed’s upcoming Nov. 1 decision on interest rates, which officials have suggested may increase one more time ahead of the new year.

Fed Chari Jerome Powell said in a discussion at the Economic Club of New York last week: “We certainly have a very resilient economy on our hands.”

“Many forecasts called for the US economy to be in recession this year. Not only has that not happened; growth is now running for this year above its longer-run trend. So thats been a surprise,” he added.

If those trends continue, it could allow the Fed to achieve a highly sought-after soft landing, in which the central bank would manage to slow inflation to its 2% target without causing a deep recession.

At the same time, Powell has suggested that if the economy keeps growing robustly, the Fed might have to raise rates further. Its benchmark short-term rate — which affects the rates on many consumer and business loans — currently sits between 5.25% and 5.5%, a 22-year high.

Last month, Fed officials unanimously decided to hold the record-high rate steady for the second time in six policy meetings so far this year.

“Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said last week.

With Post wires.

Politics

Unite votes to suspend Angela Rayner over Birmingham bin strike

Published

2 hours ago

July 12, 2025

admin

Unite votes to suspend Angela Rayner over Birmingham bin strike

Labour’s largest union donor, Unite, has voted to suspend Deputy Prime Minister Angela Rayner over her role in the Birmingham bin strike row.

Members of the trade union, one of the UK’s largest, also “overwhelmingly” voted to “re-examine its relationship” with Labour over the issue.

They said Ms Rayner, who is also housing, communities and local government secretary, Birmingham Council’s leader, John Cotton, and other Labour councillors had been suspended for “bringing the union into disrepute”.

There was confusion over Ms Rayner’s membership of Unite, with her office having said she was no longer a member and resigned months ago and therefore could not be suspended.

But Unite said she was registered as a member. Parliament’s latest register of interests had her down as a member in May.

Politics latest: Italy and other EU countries have ‘huge doubts’ about legality of UK migrant deal

The union said an emergency motion was put to members at its policy conference in Brighton on Friday.

Unite is one of the Labour Party’s largest union donors, donating £414,610 in the first quarter of 2025 – the highest amount in that period by a union, company or individual.

The union condemned Birmingham’s Labour council and the government for “attacking the bin workers”.

Mountains of rubbish have been piling up in the city since January after workers first went on strike over changes to their pay, with all-out strike action starting in March. An agreement has still not been made.

Ms Rayner and the councillors had their membership suspended for “effectively firing and rehiring the workers, who are striking over pay cuts of up to £8,000”, the union added.

‘Missing in action’

General secretary Sharon Graham told Sky News on Saturday morning: “Angela Rayner, who has the power to solve this dispute, has been missing in action, has not been involved, is refusing to come to the table.”

She had earlier said: “Unite is crystal clear, it will call out bad employers regardless of the colour of their rosette.

“Angela Rayner has had every opportunity to intervene and resolve this dispute but has instead backed a rogue council that has peddled lies and smeared its workers fighting huge pay cuts.

“The disgraceful actions of the government and a so-called Labour council, is essentially fire and rehire and makes a joke of the Employment Relations Act promises.

“People up and down the country are asking whose side is the Labour government on and coming up with the answer not workers.”

Sir Keir Starmer’s spokesman said the government’s “priority is and always has been the residents of Birmingham”.

He said the decision by Unite workers to go on strike had “caused disruption” to the city.

“We’ve worked to clean up streets and remain in close contact with the council […] as we support its recovery,” he added.

A total of 800 Unite delegates voted on the motion.

World

Donald Trump announces 30% tariff on imports from EU

Published

4 hours ago

July 12, 2025

admin

Donald Trump announces 30% tariff on imports from EU

Donald Trump has announced he will impose a 30% tariff on imports from the European Union from 1 August.

The tariffs could make everything from French cheese and Italian leather goods to German electronics and Spanish pharmaceuticals more expensive in the US.

Mr Trump has also imposed a 30% tariff on goods from Mexico, according to a post from his Truth Social account.

Announcing the moves in separate letters on the account, the president said the US trade deficit was a national security threat.

In his letter to the EU, he wrote: “We have had years to discuss our trading relationship with The European Union, and we have concluded we must move away from these long-term, large, and persistent, trade Deficits, engendered by your tariff, and non-Tariff, policies, and trade barriers.

“Our relationship has been, unfortunately, far from reciprocal.”

In his letter to Mexico, Mr Trump said he did not think the country had done enough to stop the US from turning into a “narco-trafficking playground”.

The president of the European Commission, Ursula von der Leyen, said today that the EU could adopt “proportionate countermeasures” if the US proceeds with imposing the 30% tariff.

Ms von der Leyen, who heads the EU’s executive arm, said in a statement that the bloc remained ready “to continue working towards an agreement by Aug 1”.

“Few economies in the world match the European Union’s level of openness and adherence to fair trading practices,” she continued.

“We will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.”

Ms von der Leyen has also said imposing tariffs on EU exports would “disrupt essential transatlantic supply chains”.

Meanwhile, Dutch Prime Minister Dick Schoof said on the X social media platform that Mr Trump’s announcement was “very concerning and not the way forward”.

He added: “The European Commission can count on our full support. As the EU we must remain united and resolute in pursuing an outcome with the United States that is mutually beneficial.”

Mexico’s economy ministry said a bilateral working group aims to reach an alternative to the 30% US tariffs before they are due to take effect.

The country was informed by the US that it would receive a letter about the tariffs, the ministry’s statement said, adding that Mexico was negotiating.

Trump’s tariff threats and delays

On his so-called “liberation day” in April, Mr Trump unleashed “reciprocal tariffs” on many of America’s trade partners.

The US president said he was targeting countries with which America has a trade imbalance.

However, since then he’s backed down in a spiralling tit-for-tat tariff face-off with China, and struck a deal with the UK.

The US imposed a 20% tariff on imported goods from the EU in April but it was later paused and the bloc has since been paying a baseline tariff of 10% on goods it exports to the US.

In May, while the US and EU where holding trade negotiations, Mr Trump threated to impose a 50% tariff on the bloc as talks didn’t progress as he would have liked.

However, he later announced he was delaying the imposition of that tariff while negotiations over a trade deal took place.

As of earlier this week, the EU’s executive commission, which handles trade issues for the bloc’s 27-member nations, said its leaders were still hoping to strike a trade deal with the Trump administration.

Without one, the EU said it was prepared to retaliate with tariffs on hundreds of American products, ranging from beef and auto parts to beer and Boeing airplanes.

US