The most recent numbers from the United States employment sector and consumer spending reports show that the country’s economy continues to thrive in the face of numerous issues that have plagued it over the past several months.

As of the end of September 2023, retail sales were up by 0.7% from where they were in August. According to a report released by the Commerce Department on Tuesday, October 17th, this was over twice the 0.3% previously forecast by market analysts. Indeed, US retail earnings have risen consistently over six consecutive months, proving the resilience of consumer spending in the country.

For many economists, consumer spending has been bolstered by the addition of almost 270,000 new positions to the country’s job market throughout the same timeframe. However, they warn that this may not necessarily be good news.

Rising Risks in the Fourth Quarter

Some experts say that strong consumer spending going into the fourth quarter of the year, coupled with a lack of cooling on the part of the labor market, could spell trouble where inflation is concerned. This, in turn, could prompt the Federal Reserve to impose a new round of interest rate hikes to bring inflation down to manageable levels.

According to Fed chairman Jerome Powell, previous cases wherein the US economy grew in strength led to the imposition of interest rate hikes meant to keep the prices of consumer goods down. Just last month, Powell stated that the Fed is not looking for lower consumer spending, but it could mean that the agency would need to do more to get inflation back down to 2%.

Just last week, Fed officials scrambled to allay fears among market watches of yet another rate hike. Officials explained how credit tightening measures due to rising bond yields could prevent the need for another increase in interest rates. As a result, bond yields got a necessary reprieve even as stocks rallied throughout the market.