The U.S. economy expanded at a 2.6% annual rate within the third quarter, led by exports and spending, the Bureau of Economic Evaluation reported on Thursday.
The rise follows declines within the two prior quarters, when the economy contracted by 1.9% and 0.6%, respectively. That led to some saying the economy was in a recession in the course of the first half of the 12 months.
“Real GDP turned up within the third quarter, increasing 2.6 percent after decreasing 0.6 percent within the second quarter,” the BEA said. “The upturn primarily reflected a smaller decrease in private inventory investment, an acceleration in nonresidential fixed investment, and an upturn in federal government spending that were partly offset by a bigger decrease in residential fixed investment and a deceleration in consumer spending. Imports turned down.”
Estimates of the third quarter performance had been rising ahead of the report, with the widely followed GDPNow model from the Federal Reserve Bank of Atlanta revised upward on Wednesday to three.1%. Other private forecasts had been slightly below 3%.
“US Q3’22 GDP increases 2.6% (SAAR) reaffirming that there was no recession in 1H’22 & not in recession now,” RSM US LLP Principal & Chief Economist Joseph Brusuelas tweeted. “Data below topline strongly implies, nonetheless, that the economy is moving at a much slower pace of expansion.”
Political Cartoons on the Economy
The health of the economy, together with the inflation rate, will probably be a key factor for the Fed when its monetary policy committee meets next week. Expectations are for the central bank to lift rates of interest by 75 basis points, but some think it could take a breather after that to see whether its aggressive stance has reduced inflation.
The Fed said the economy expanded “modestly” as of early October but noted some slowing in sectors corresponding to housing, retail and manufacturing. The labor market stays tight, even when it has eased somewhat from earlier this 12 months. Consumer sentiment readings have generally been negative, although spending has held up amid inflation now running at 8.2% annually.
There are some signs that fears of a recession and a slowing economy are already working to slow inflation in some areas of the economy where it has been raging. That features housing and gas prices.
Home price appreciation slowed in August, rising 13% 12 months over 12 months in comparison with 15.6% a month earlier and nearly 20% within the spring. The national average price of a gallon of gas, meanwhile, sits at $3.79, down nine cents up to now week.
Zumper, an internet apartment rental service, has seen a “seismic shift” within the direction of rents, says CEO Anthemos Georgiades. National median rents for a one bedroom apartment have fallen 0.8% up to now month to $1,491 while two bedroom units are down 0.7% to $1,832. Greater than half of the cities surveyed by Zumper have seen declines, with 19 cities posting no change.
Two aspects have contributed to the easing in rent, Georiades says: a rise in multi-unit dwellings coming available available on the market and growing fears of recession dampening demand.
“A variety of those massive increases (earlier this 12 months) are being eroded,” he says. “Three quarters of our renters imagine we’re in a recession.”
While there is no such thing as a official declaration of a recession, many economists imagine that’s inevitable because the Fed continues to show the screws on inflation.
“By way of a recession, we’re pondering the fourth quarter will probably be negative on weakening consumption and weakening investment,” says Jose Torres, senior economist at Interactive Brokers.
One spot of the economy that is still strong is the labor market. The Labor Department on Thursday reported that the variety of Americans filing first-time claims for unemployment advantages rose 3,000 to 217,000.
The four-week moving average was 219,000, a rise of 6,750 from the prior period.
Guy Berger, principal economist at LinkedIn, says the job market still acts like the most well liked in history. And while distant work has come down from its pandemic levels, 14% of staff say they’re working remotely in comparison with 2% before the coronavirus struck in 2020 and down from 20% in February.
Staff have lost a few of their bargaining power, he notes, but “the economy just isn’t behaving as if there’s a recession without delay.”
Also Thursday, the European Central Bank raised rates of interest by 75 basis points because it seeks to quell rising inflation on the continent.