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In the United States, the gross domestic product expanded by 3.5% during the third quarter, the strongest growth rate in the last 2 years. The data reflected strong consumer spending in services and investments in buildings and intellectual property. Since the recession ended in 2009, the U.S. economy has grown at the slowest average expansion rate since 1949, averaging about 2%.
After a short spurt during the third quarter, certain measures of a strong economy, such as income growth, consumer spending, and inflation weakened over the last month. According to the United States Commerce department, household spending rose just by 0.2%, while incomes and inflation remained stationary. Household consumer spending continued to increase, while income growth softened and is rising the slowest year-over-year gain since December 2013. A strong U.S. dollar has continued its strengthening trajectory, making it difficult for manufactures selling U.S. products in markets globally.
Price inflation is another economic marker that is closely observed, and the personal consumption expenditures price index has risen by 1.4% from the previous year. The measure’s steady growth reflects stabilizing energy prices and firm consumer demand, allowing business’s to pass price increases along to consumers. According to the University of Michigan’s monthly index, consumer sentiment reached its highest level since January 2004 to a reading of 98.2. Factors which are likely boosting the consumer sentiment include the rising US stock market, relatively low gasoline prices, and moderate increases in wage growth. Consumer sentiment index remains relevant because it demonstrates how households feel about the economy; because when households have a positive outlook, they are more likely to spend money, further fueling economic growth.
These positive indicators have supported the Federal Reserve Bank’s decision to raise its benchmark interest rate, however the inflation remain well below the targeted 2%. The overall outlook remains murkier due to the expected growth rate for the final quarter of the fiscal year being between 1 and 2 percent, after a 3.5% growth rate over the third quarter.
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