US Economy Bounces Back, but It Might Be Short-Lived

Things are worse than growth figures suggest, analysts say
By Rob Quinn,  Newser Staff
Posted Oct 27, 2022 11:05 AM CDT
GDP Growth Returns, but Economists Still Predict Recession
Trucks line up to enter a Port of Oakland shipping terminal on Nov. 10 in Oakland, Calif. Analysts say the fixing of supply chain bottlenecks helped boost exports.   (AP Photo/Noah Berger, File)

The US economy grew at a better-than-expected 2.6% annual rate from July through September, snapping two straight quarters of economic contraction and overcoming punishingly high inflation and interest rates, the AP reports—but many economists say the outlook is worse than the figures suggest. Thursday's estimate from the Commerce Department showed that the nation's gross domestic product, the broadest gauge of economic output, grew in the third quarter after having shrunk in the first half of 2022. Stronger exports and steady consumer spending, backed by a healthy job market, helped restore growth to the world's biggest economy.

Consumer spending, which accounts for about 70% of US economic activity, expanded at a 1.4% annual pace, down from a 2% rate from April through June. Last quarter's growth also got a boost from exports, which shot up at an annual pace of 14.4%. Housing investment, though, plunged at a 26% annual pace, hammered by surging mortgage rates as the Federal Reserve raises borrowing costs to combat chronic inflation. More:

  • Narrowing trade deficit: CNN reports that the growth was "mostly fueled by a rebalancing of imports and exports," with exports growing and fewer foreign goods shipped to the US as consumers shifted spending to things like travel and dining out. Analysts say the narrowed trade balance could be a one-time boost, with consumers expected to pull back further on spending in the months to come and the strong US dollar expected to dampen demand for US exports.
  • All may not be as it seems: "The irony is, we're seeing the strongest growth of the year when things are actually slowing," Diane Swonk, chief economist at KPMG, tells the Washington Post. "There are some real cracks in the foundation. Housing is contracting. The consumer is slowing. GDP is growing, but not for all of the right reasons."

  • Slowdown is taking hold: The Wall Street Journal reports that the GDP report showed "evidence of the broad economic slowdown taking hold," with final sales to private domestic purchasers—a measure many economists see as the best gauge of underlying demand—creeped up at a 0.1% annual rate in the third quarter, after it had increased 2.1% in Q1. "I talk with a lot of folks, and you just hear it over and over again: It's tougher to make ends meet," says Gary Lemanski, whose Michigan-based company, Altus Brands LLC, has seen a big drop in demand for accessories for hunting and outdoor recreation.
  • Enjoy it while it lasts: Most economists are predicting a recession in 2023, with the economy expected to grow modestly in the last quarter of this year before contracting in the first two quarters of next year, USA Today reports. "This is the sort of GDP report we should be happy to see at this point in a recovery," said Dean Baker at the Center for Economic and Policy Research, per CNN. "However, with the Federal Reserve continuing to hike rates, and most of the impact of past rate hikes yet to be felt, this could be the last good report we see for a while."
(More US economy stories.)

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