April 08, 2024

The United States shows signs of economic recovery

Factors that drove economic growth

The robust economic growth in the United States is attributed to several key factors. One of them is the increase in wages due to a tight labor market, which has boosted consumer spending. Additionally, businesses have restocked at an accelerated pace to meet the growing demand.

The Department of Commerce report highlights that consumer spending was a determining factor in economic growth as they increased purchases in different sectors, such as automobiles and restaurants. However, a decrease in business investment was observed, especially in equipment purchases and the push for factory construction.

Future Outlook

While third-quarter data is encouraging, a gradual slowdown in the U.S. economy is expected in the coming months. Analysts point out that this could be due to a decrease in the consumer savings rate, combined with the resumption of student loan payments starting in October. This situation could impact consumer spending in the short term.

Furthermore, higher interest rates pose a challenge for low-income consumers relying on debt to finance their purchases. Mortgage rates, for example, are at a 23-year high, leading to a decline in sales of used homes. The housing sector is expected to weaken the overall economy in the coming months.

Lael Brainard, Director of the National Economic Council, emphasized that credit costs could affect future economic growth expectations. Despite this, she highlighted the solid GDP growth in the third quarter.

Impact on inflation and borrowing costs

The increase in borrowing costs and persistent inflation are two challenges that could affect the U.S. economy in the future. Higher interest rates threaten to increase delinquency on credit cards, especially for low-income consumers.

Moreover, the higher borrowing costs and elevated mortgage rates are expected to negatively impact the housing market. As mortgage rates approach an annual 8%, sales of used homes continue to decline.

Conclusions

The U.S. economy has shown encouraging signs of recovery in the third quarter of 2023, with nearly a 5% year-on-year GDP growth. However, a gradual slowdown is expected in the coming months due to factors such as the decline in the consumer savings rate and higher borrowing costs.

Despite these challenges, the robust economic growth reflects the resilience of the U.S. economy and its ability to adapt to different circumstances. Analysts will closely monitor key economic indicators in the next quarters to assess the direction of the economy and its impact on global markets.