Decomposition Of Real Private Demand Growth, 4-Quarter Moving Average
The Federal Reserve held rates steady at its October meeting this week as policymakers await more data before hiking again. Well, data released a day after the meeting suggest the U.S. is in a growth boom. Real GDP grew at a 3.4% annualized rate in the third quarter. Excluding inventories, government spending, and trade, private demand accelerated to a 4.9% pace, the fastest quarterly gain since the fourth quarter of 2017, excluding the Covid-19 recovery. More interestingly, while the AI investment boom continue to drive growth, consumer spending has also accelerated. As Fed Chair Warsh said at his October Federal Open Market Committee (FOMC) press conference, “high-tech investment is leading the acceleration,” but the capex story is broadening to other sectors of the economy. For the Fed, while stronger growth doesn’t necessarily imply more inflationary pressure, a resilient economy suggests policymakers can focus squarely on its inflation mandate, with core inflation on track to miss the 2% target for six years and possibly longer. The Fed wanted to wait for more data to justify more hikes. The data answered, loudly.
