The U.S. economy, as measured by real gross domestic product, grew at an annualized rate of 3.2% in the third quarter, according to an updated final estimate released by the Bureau of Economic Analysis on Thursday.
That figure was up from the prior estimate of 2.9% the bureau made Nov. 30.
In the second quarter, real GDP decreased 0.6%, after contracting 1.6% in the first quarter.
The BEA explained in the release that the higher real GDP figure for the third quarter "primarily reflected upward revisions to consumer spending and non-residential fixed investment that were partly offset by a downward revision to private inventory investment."
Rhys Williams, chief strategist at Spouting Rock Asset Management, said in an email that while the third-quarter GDP report came in "slightly hotter than expected," it should be noted that it is "very backward-looking data."
"We don't think the narrative that inflation is cooling, and the economy is slowing in the fourth quarter should change," he added. "Consumer spending came in better than expected and exports were above expectations."
Mr. Williams further said he thinks consumer spending "will slow dramatically in the next few weeks, as layoffs really take off after the holidays. So we believe this may be the last economic number that comes in above expectations."
As such, he expects "decelerating growth" in the fourth quarter and "another deceleration" in the first quarter of 2023.
Spouting Rock has $2.3 billion in assets under management.
David Wagner, portfolio manager at Aptus Capital Advisors, pointed out that since almost 60% of GDP is derived from services revenue, it should not come as a big surprise that GDP continues to beat on the upside.
"As long as the consumers continue to spend, propping up earnings, GDP should continue to come in higher than what other economic data points, like PMI, suggest," he said by email. "This doesn't make the Fed's job any easier, as (the data) continues to show the strength of the consumer in the face of higher inflation."
Aptus Capital has $3.9 billion in AUM.
The Federal Reserve, which has been raising interest rates to cool inflation, on Dec. 14 hiked the federal funds rate by 50 basis points — after four straight hikes of 75 basis points — to a targeted range of 4.25% to 4.5%.
As of Thursday noon EST, futures traders had priced in a 70% chance that the Fed will increase the federal funds rate by 25 basis points to range of 4.5% to 4.75% at its next meeting Feb. 1.