Stronger GDP Growth Pushes Rates Higher

What Is Happening Today

Mortgage rates are under pressure today as new economic data showed the US economy grew faster than expected. Stronger growth tends to push interest rates higher because it can increase inflation risk and reduce the urgency for rate cuts. While mortgage bonds moved off their worst levels of the morning, stronger economic momentum is creating short term headwinds for rates.

The main driver today is a surprisingly strong GDP report, which reinforced the idea that the economy entered the fourth quarter with solid momentum. Additional data around durable goods orders and employment also leaned stronger than expected, adding to the pressure on rates. While inflation data has been improving recently, today’s reports remind markets that economic strength can still complicate the path lower for interest rates.

Economic Growth Update

Third quarter GDP grew at a 4.3% annualized pace
This was well above expectations of 3.3%
Growth also improved from 3.8% in the second quarter
When averaging growth across the first three quarters, overall economic growth stands near 2.5%
Stronger GDP typically pressures mortgage rates higher

Consumer Spending and Government Impact

Consumer spending made up the largest share of economic growth
A surge in electric vehicle purchases ahead of an EV tax credit expiration boosted spending
Government spending, including defense, increased
Trade balance improved slightly due to tariffs

These factors helped lift overall GDP beyond expectations.

Inflation Data Within GDP

Quarterly PCE inflation rose from 2.1% to 2.8%
Core PCE inflation increased from 2.6% to 2.9%
This inflation data was largely expected by markets
Recent monthly inflation readings have shown improvement
November CPI data came in much lower than expected

While inflation within GDP moved higher, recent monthly data continues to show progress.

Durable Goods and Business Activity

Headline durable goods orders fell 2.2%
The market had expected a larger 1.5% decline
Headline data was heavily influenced by aircraft and defense orders
Core durable goods orders increased 0.5%
Prior core readings were revised higher by 0.2%
Core shipments rose 0.7%, above the 0.3% expectation

Stronger core activity suggests businesses continue investing despite higher rates.

Employment Trends to Watch

ADP data shows an average of 11,500 jobs created per week over the past four weeks
That equates to just under 50,000 jobs over the month
The prior four week period was revised higher from 16,250 to 17,500 jobs per week
Employment trends appear stronger than earlier reports suggested

While ADP does not always align with government jobs data, it adds to the picture of a resilient labor market.

Holiday Schedule Impact

Wednesday: Mortgage applications and jobless claims, with early bond market close at 2:00 PM ET
Thursday: Markets closed for Christmas, no morning update
Friday: Markets open with no major scheduled data

Holiday trading can create thinner market conditions and added volatility.

Bottom Line

Today’s stronger than expected economic data is putting upward pressure on mortgage rates, reminding markets that growth remains a key obstacle to sustained rate relief. Strong consumer spending, business investment, and employment trends all point to continued economic resilience, which can keep rates elevated in the near term.

At the same time, inflation data outside of today’s GDP report has been showing improvement, suggesting the longer term direction for rates may still trend lower if growth begins to cool. For now, mortgage rates remain sensitive to economic strength, and upcoming data will continue to shape the balance between growth and inflation in the weeks ahead.