3 min read

US GDP Grows during Third Quarter of the Year

Following two quarters of economic restriction, the nation's Gross Domestic Product increased by 2.6% amid higher interest rates and inflation.
US GDP Grows during Third Quarter of the Year

Call it the calm before the storm, writes the USA Today. After shrinking the first half of the year, the U.S. economy rebounded from July through September despite inflation that has hovered near a 40-year high and sharply rising interest rates. But the performance likely marked a reprieve ahead of next year’s projected recession rather than a sign of a brighter outlook.

"The U.S. economy is undeniably cooling," Gregory Daco, chief economist of EY-Parthenon, wrote in a note to clients.

Latest GDP report shows US economy grew 2.6%, but recession risks loom (USA Today)

Excerpt from the USA Today: The solid showing was fueled by a more favorable trade balance and modest rises in consumer and business spending, offsetting another plunge in housing construction and weaker business stockpiling. The nation’s gross domestic product, the value of all goods and services produced in the U.S., grew at a seasonally adjusted annual rate of 2.6% in the third quarter, the Commerce Department said Thursday. Bloomberg had forecast a 2.3% rise in output. The advance followed declines of 1.6% and 0.6% in the first and second quarters that were largely due to changes in business stockpiling and trade – two volatile categories that typically don’t reflect the health of the economy.
Embed from Getty Images

According to CNBC, the positive growth reading follows consecutive negative quarters to start the year, meeting a commonly accepted definition of recession, though the National Bureau of Economic Research is generally considered the arbiter of downturns and expansions.

"Overall, while the 2.6% rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained," wrote Paul Ashworth, chief North America economist at Capital Economics. "Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates. We expect the economy to enter a mild recession in the first half of next year."

U.S. GDP accelerated at 2.6% pace in Q3, better than expected as growth turns positive (CNBC)

Excerpt from CNBC: The report comes as policymakers fight a pitched battle against inflation, which is running around its highest levels in more than 40 years. Price surges have come due a number of factors, many related to the Covid pandemic but also pushed by unprecedented fiscal and monetary stimulus that is still working its way through the financial system. The underlying picture from the BEA report showed an economy slowing in key areas, particularly the consumer and private investment. The growth came in large part due to a narrowing trade deficit, which economists expected and consider to be a one-off occurrence that won’t be repeated in future quarters.
Embed from Getty Images

In a related story from the Wall Street Journal, worker pay and benefits rose rapidly in the third quarter from a year before, maintaining pressure on inflation. Wages and benefits have been increasing rapidly since the middle of last year as employers competed for workers in a tight labor market.

U.S. Wages Rose Rapidly in Third Quarter, Keeping Pressure on Inflation (Wall Street Journal)

Excerpt from the Wall Street Journal: The employment-cost index, a measure of what employers pay for wages and benefits, rose 5% in the third quarter from the same period a year earlier, the Labor Department said Friday. That was a slightly slower pace than in the second quarter but still well above gains prior to the pandemic. On a quarterly basis, wages and benefits rose a seasonally-adjusted 1.2% in the third quarter from a 1.3% increase in the second quarter. The third-quarter gain matched economists’ expectations. The report follows government figures released Thursday showing that the U.S. economy expanded at a solid pace in the third quarter despite climbing interest rates and signs of easing consumer and business demand.
Embed from Getty Images

Jump to this week's edition of:
World News - Part 1
World News - Part 2
US News
Business - Part 1
Business - Part 2
Special Report
Podcast Companion