U.S. gross domestic product (GDP) rose by 2.1 percent, marking a rate just a touch below the 2.2 percent pace seen in the first quarter of 2023. This figure comes from the Commerce Department’s Bureau of Economic Analysis, in its third estimate for the period.
The uptick in real GDP was driven by gains in nonresidential fixed investment, increased consumer spending, and higher state and local government outlays. These advances were partly offset by a retreat in exports, while imports also declined.
The quarterly comparison shows a softer consumer spending path and reduced federal government outlays relative to the prior quarter. At the same time, exports contracted, but private sector activity in stocks rebounded. Nonresidential fixed investment accelerated, imports fell further, and housing investment saw a smaller decline.
The third estimate, which incorporates more complete data than the second, confirmed the 2.1 percent increase in GDP. The personal consumption expenditures price index, a key inflation gauge used by the Federal Reserve, stood at 2.5 percent on an annual basis during the period. The core PCE index, which excludes food and energy for volatility reasons, showed a 3.7 percent rate.
The preliminary GDP reading for the third quarter of 2023 is scheduled to be published on October 26, 2023.
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The Federal Reserve paused its rate hikes, keeping policy rates in the target range of 5.25 to 5.50 percent. This marks the highest level since January 2001, reflecting a cautious stance on the trajectory of inflation and growth.
In a subsequent press conference, Fed Chair Jerome Powell cautioned that another increase before year-end could still be on the table, although the probability was not overwhelmingly clear at the time.
Powell noted that most Committee members believed a rate rise in either of the remaining two meetings in the year was more likely than not. He emphasized that any decision would hinge on incoming data, evolving forecasts, and associated risks, rather than pre-set intentions.
The head of the American Export Institute underscored the broad impact of tighter financial conditions, while Powell reiterated that future Fed decisions would be guided by data and risk assessments. The overall message remained that policy would adapt to evolving conditions rather than follow a fixed path.