Federal Reserve officials could finally hike interest rates as
early as next month as U.S. data showed that the economy grew at a faster rate
in the last few months than previously forecast.
The GDP, representing total economic output, increased at a 2.2
percent annual rate in the last quarter according to the report released on
Wednesday from the Department of Commerce.
Experts had estimated a 1.4 percent climb due to the
worldwide economic decline as companies reined in spending. In comparison, the
second quarter saw a rate of nearly 4 percent.
Recent reports suggest that the inventory cutbacks were not
as severe as were previously thought. That sentiment was backed up by several
pieces of research, like the one conducted by finance house CITIC Tokyo
International, which showed the predictions were overestimated by about $30
billion.
“Possibly the government have got their figures wrong
regarding the lengths to which many retailers were going regarding post-summer
restocking,” said head analyst at Pantheon Macroeconomics, Ian Shepherdson.
He predicts that growth in the final quarter of 2015 will be
4 percent, slightly lower than many others are forecasting, due to the extra
inventory purchasing companies will need to do as we come to the holiday
season.
As far as consumer spending goes, Q3 was stable and growth
positive at 2.8 percent annual rate. An important gauge of business investment
was solid at 3.4 percent.
When all the figures are dialled in for total economic
growth, the nation looks on course to match last year’s results, a steady 2.5
percent, not a bad result especially considering a significantly weak first
quarter to 2015.
All this may result in the Federal Reserve hiking interest
rates in the near future, possibly next month. Another positive indicator which
may bring on the rate increase earlier was the jobs data which was very strong
this month.
In an effort to kick start the economy after the global
economic meltdown of 2008, the Fed have been reluctant to hike what has been
dubbed the ‘federal funds rate’ lest they inadvertently discourage spending.
If the market continues to improve they could find the need
to adjust the rate soon as they look to hit the 2 percent annual target they
have set themselves for inflation, not only to bring the country back to its
former glories but also to stave off the Chinese in their bid to secure top
spot in the economic rankings.
