U.S. economy grows 2.6% in the third quarter — but recession worries aren’t going away

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number: The economy grew at an annualized 2.6% pace in the third quarter, rebounding from two consecutive declines in the first half of the year, which ignited debate about whether the US had plunged into recession.

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The official resumption of growth was largely driven by a shrinking trade deficit and emerging weak spots in the economy. Most economists also warn that the good news may not last: they predict a recession is on the way by next year.

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The main source of the rebound in GDP – a sort of scorecard for the economy – was the shrinking trade deficit.

Consumer spending, the main engine of the economy, has been relatively stable this year. Domestic outlay grew at a modest 1.4% in the third quarter, Government said.

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GDP declined by 0.6% in the second quarter and 1.6% in the first quarter. When an economy is in recession, two straight quarters of negative GDP meets an old but informal rule.

Yet both declines were exacerbated by an unusually large change in the international trade deficit and trade inventories.

Economists surveyed by the Wall Street Journal have forecast a 2.3% increase in third-quarter GDP. All figures have been adjusted for inflation.

The fall in GDP comes shortly before the decisive elections to determine Congress’s control.

President Biden lauded the growth spurt, saying “our economic recovery continues to advance.”

Utah Republican Sen. Mike Lee called the report a “welcome correction.” But he also said, “Americans are paying for the Biden administration’s policy choices with less purchasing power and slower economic growth.”

big picture: The rebound in GDP in the third quarter is already fueled by rising signs that the economy is slowing.

The Federal Reserve is raising interest rates rapidly to tame high inflation and the economy is caught in the crosshairs. Higher borrowing costs slow economic growth and fuel unemployment by causing consumers and businesses to spend less.

Preliminary estimates suggest a fall in GDP in the fourth quarter, and many economists and business leaders predict a recession as early as next year.

“We expect to experience a mild to moderate slowdown in the US and one that will likely be slightly deeper and longer in Europe,” said McDonald’s MCD chief executive Chris Kempczinski.

Main details:

The preliminary GDP report for the third quarter will be updated twice over the next two months as new information is collected and updated.

looking ahead: Jeffrey Roach, chief economist at LPL Financial, said: “Given the strength of the consumer sector, the US is not currently in a recession, but the trajectory for growth looks weak. With a deteriorating housing market and an aggressive Federal Reserve, inflation declines by 2023.” puts the economy in a precarious position.

Market Feedback: Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
Extending a recent rally, Thursday’s trading turned bullish.

True to the name of McDonald’s CEO.

Credit: www.marketwatch.com /

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