GDP Growth Rate Jumps in Third Quarter

(Chart courtesy of U.S. Commerce Department)

U.S. economic growth showed a strong 4.9% pace in the third quarter, the U.S. Commerce Department reported Thursday.

MBA Senior Vice President and Chief Economist Mike Fratantoni noted the 4.9% first estimate of third quarter economic growth is more than twice the rate of growth that is likely to be sustainable over time. “As always, this estimate will be revised over the next two months as more data come in,” he said.

Fratantoni said two factors contributed to the strong growth seen between July and September. “First, consumer spending on goods and services remained quite strong,” he said. “Some of the strength is due to a big increase in spending on durable goods as well as a pickup in estimated spending on housing and utilities. As excess savings built up during the pandemic continue to drop and wage gains decelerate, it is difficult to see how this pace of consumer spending growth can be maintained. We are now seeing some consumer stress in the rising delinquency rates for credit cards and auto loans.”

The second driver of growth was a big increase in private inventories, Fratantoni noted. “These jumps can often be reversed in subsequent quarters, and we do expect that will contribute to slower growth in the fourth quarter,” he said. The annual change in core Personal Consumption Expenditures, a key inflation measure for the Federal Reserve, fell to 2.4% from 3.7% last quarter. “This might be the best news in this report, as it shows progress towards the Fed’s 2% goal, despite the robust GDP growth in the third quarter,” Fratantoni said.