US Economy Experiences Strongest Growth in Almost Two Years

The US economy grew faster than expected in the third quarter of the year, thanks to a strong job market and consumer spending. According to the government's first estimate, the economy expanded at an annual rate of 4.9% from July to September, marking the biggest rise since the last three months of 2021. Despite the Federal Reserve's attempts to curb spending with higher interest rates, consumers continued to spend, supported by bigger pay packets and a good jobs market. Consumer spending, which accounts for more than two-thirds of economic activity in the US, was the main driver behind the growth. This unexpected increase raises doubts about previous predictions of a possible recession in the world's largest economy. The latest data comes just before a crucial meeting for the US Federal Reserve, where they will decide whether to raise interest rates again next week. Some economists have expressed concerns that increasing rates could lead to an economic downturn. However, so far, the US economy has managed to exceed the worst forecasts. Nevertheless, economists predict a potential slowdown in the last three months of 2023 as consumers deplete their pandemic-related savings. They also suggest that the Federal Reserve may consider another rate rise due to persistent inflation. In another update, the US Labor Department reported that the number of people applying for unemployment benefits remains low. However, strikes by the United Auto Workers and the resumption of student loan repayments by millions of Americans in the final quarter of the year may hamper growth and put additional pressure on budgets. In Europe, the European Central Bank (ECB) decided to leave interest rates unchanged as higher borrowing costs take effect. After 10 successive rate rises, eurozone inflation has been gradually decreasing and stood at 4.3% in September. Although inflation is still high, the ECB believes that borrowing costs are now sufficient and that the effects of previous rate increases will continue to make a significant contribution to meeting its target of 2%. Analysts note that while there are still risks to the global economy, such as uncertainty in the Middle East and Ukraine, the focus is now shifting towards the possibility of rate cuts due to the stagnating Euro area economy.