The US economy posted its first positive growth of 2022 in the third quarter, easing recession fears at least temporarily, the Bureau of Economic Analysis reported Thursday.
According to preliminary estimates, GDP, the sum of all goods and services produced from July to September, increased at an annual pace of 2.6% during this period. This beat his Dow Jones forecast of 2.3%.
The number meets the generally accepted definition of a recession, with a series of negative quarters since the beginning of the year, but the National Bureau of Economic Research is generally considered the arbiter of recessions and expansions.
The growth was largely due to a narrowing trade deficit, which economists believe is temporary and unlikely to repeat itself in future quarters.
GDP growth is also driven by increased consumer spending, non-residential capital investment, and government spending. The report reflects a continued shift towards spending on services over goods, with spending on the former up 2.8% and spending on goods down 1.2%.
The BEA said profits were offset by a decline in housing equipment spending and personal inventories.
“Overall, the 2.6% recovery in the third quarter more than reversed the decline in the first half, but we don’t expect this strength to sustain,” said Paul Ashworth, chief North American economist at Capital Economics. No. “Exports will soon decline and domestic demand will be crushed under the weight of rising interest rates. The economy will enter a mild recession in the first half of next year.”
the market is rise after releaseThe Dow Jones Industrial Average rose more than 300 points in early Wall Street trading.
In other economic news on Thursday, weekly unemployment claims climbed to 217,000, still below an estimated 220,000. Orders for long-lasting products in September were up 0.4% month-on-month, below expectations of 0.7%.
The report comes as policymakers battle inflation, the highest level in more than 40 years. The price spike was caused by many factors. covid pandemic But it has also been boosted by unprecedented fiscal and monetary stimulus, and continues to work through the financial system.
The underpinnings of the BEA report show that the economy is slowing in key areas, especially consumer and private investment.
Consumer spending, as measured by personal spending, declined from 2% in Q2 and grew at a pace of just 1.4% in Q4. Gross private domestic investment fell 8.5% in the second quarter, continuing the trend after he fell 14.1% in the second quarter. Residential investment, a measure of home construction, fell 26.4% after falling 17.8% in the second quarter, reflecting a sharp slowdown in the property market.
On the positive side, exports added to GDP increased by 14.4% and negative imports fell by 6.9%. Net exports of goods and services added 2.77 percentage points to the headline total.
There has been some good news on the inflation front.
The Chain Weighted Price Index, a cost-of-living measure that adjusts consumer behavior, rose 4.1% in the quarter, well below the Dow Jones estimate of 5.3%, largely due to falling energy prices. Also, the Federal Reserve’s main inflation indicator, the Personal Consumption Expenditure Price Index, rose 4.2%, down significantly from his 7.3% in the previous quarter. Core prices, excluding food and energy, rose 4.5%, broadly in line with Wall Street expectations.
Earlier this year, the Fed launched a rate hike campaign aimed at curbing inflation. Since March, the central bank has raised its benchmark borrowing rate by 3 percentage points to its highest level since just before the worst financial crisis.
These increases are intended to slow the flow of money through the economy and tame a job market where vacancies outnumber available workers by almost two to one. US is in recession.
“Our fears of a recession don’t necessarily come from this data,” said Luke Tilley, chief economist at Wilmington Trust. It’s about what happens when you do.”
“The most encouraging thing is that private consumption is still going on, and employment and wage growth continue, which should help on the private consumption front,” he added. “What worries us most is the sharp setback in corporate employment.”
The Fed is widely accepted to approve a fourth consecutive 0.75 percentage point rate hike at next week’s meeting, but the pace of rate hikes will slow after that as officials take time to assess the impact of policy on economic conditions. It can be late.
Policy makers will get the latest look at inflation data when the BEA releases its report on Friday containing consumer spending prices for September. The indicator is expected to show core prices, excluding food and energy, rose 5.2% year-on-year, or 0.5% on a month-to-month basis.