United States economy grows 3.4% in third quarter vs. 3.2% expected
- US economy expanded at a stronger pace than expected in Q3.
- The US Dollar Index holds steady above 102.00 after the GDP data.
The United States' (US) Gross Domestic Product (GDP) grew at an annual rate of 3.4% in the third quarter, the US Bureau of Economic Analysis' (BEA) first estimate showed on Thursday. This print followed the 2.2% expansion recorded in the second quarter and came in better than the market expectation of 3.2%.
"The contributors to the increase in real GDP in the third quarter were increases in investment, consumer spending, and government spending that were partly offset by a decrease in exports. Imports, which are a subtraction in the calculation of GDP, increased," the BEA noted in its press release.
Other details of the report showed that the GDP Price Index was up 2.2% in Q3, below the market expectation of 3.5% and the 6.1% increase recorded in the previous quarter.
Market reaction to US GDP data
These figures don't seem to be having a noticeable impact on the US Dollar's performance against its major rivals. At the time of press, the USD Index was little changed on the day at 102.20.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
