US GDP rose 2.6% in the third quarter
The US economy rebounded in the subsequent third quarter make a contract reduction of trade deficit in the first six months of this year hid the weakening of consumer demand.
Gross domestic product rose 2.6 percent year-on-year between July and September, beating economists’ expectations and sharply reversing a 0.6 percent decline in the second quarter of 2022 and a 1.6 percent decline in the first three months. of the year.
The expansion in the third quarter was driven by a narrowing of the trade deficit, as lower consumer demand reduced imports while exports rose. This came despite a widening commodity deficit in September, as a strong US dollar weighed on exports. Consumer spending rose by just 1.4 percent, much slower than in the previous period, suggesting the economy is beginning to slow.
Data released by the Commerce Department on Thursday will effectively end that discussion The question of whether the U.S. economy is already in a recession has plagued the summer, but it has not allayed fears that it will eventually become one, given the aggressive steps the U.S. central bank is taking to stem rising inflation.
Two consecutive quarters of GDP contraction have long been considered common criteria for a so-called “technical recession.” However, top policymakers at the Biden administration and the Federal Reserve have pushed back on that framework, citing overwhelming evidence that the economy is still strong.
The official arbiters of a recession, a group of economists at the National Bureau of Economic Research, describe it as “a significant decline in economic activity that is widespread throughout the economy and lasts for more than a few months.” They typically look at a wide range of indicators, including monthly job growth, consumer spending on goods and services, and industrial production.
The Fed is poised to raise interest rates for the fourth time in a row by 0.75 percentage points early next month, lifting its benchmark policy rate to a new target range of 3.75 percent to 4 percent. The federal funds rate was close to zero in March, making the tightening campaign one of the most aggressive in US central bank history.
The Fed may soon consider slowing the pace of rate hikes, possibly in December, but it is not expected to abandon its tight monetary policy altogether.
As of last month, officials thought the federal funds rate would reach 4.6 percent, but investors now expect it to close to 5 percent next year.
Given the extent to which the Fed’s actions will affect growth and the labor market, most economists now expect the unemployment rate to rise significantly above its current level of 3.5 percent and the economy to enter a recession next year.
Senior officials of the Biden administration save The U.S. economy is strong enough to prevent such an outcome, citing the stability of the labor market, but even Fed Chairman Jay Powell acknowledged that the chances have increased.
“Nobody knows if this process will lead to a recession, or if it does, how significant that recession will be,” he said at a recent news conference in September.
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