Gross domestic product (GDP) grew by an inflation-adjusted rate of 2.6% in the third quarter, the U.S. Bureau of Economic Analysis (BEA) reported Thursday; however, the positive growth hardly signifies a robust economy, experts say.
The growth comes after two straight quarters of economic contraction, when the U.S. economy entered the technical definition of a recession. Headline GDP growth matched investor expectations in the third quarter, which spans the three months from July to September, but the news is unlikely to change investors’ expectations of a 2023 recession, The Wall Street Journal reported.
Net exports, the sum value of all exports minus all imports, commonly referred to as the trade deficit, contributed 2.77 percentage points towards GDP growth, according to the BEA. (RELATED: ‘The Party Is Over’: Expected GDP Spike Doesn’t Spell Good News, Economists Say)
Prior to the report’s release, economists warned the Daily Caller News Foundation that the boost from trade was likely unsustainable, as a stronger dollar made U.S. exports too expensive for foreign markets. Final sales to private domestic purchasers, a measure of domestic consumer demand, showed declining annual growth from Q1 to Q3, falling from 2.1% annual growth in the first quarter to 0.1% in the third, according to the BEA.
Want to preregister a take on tomorrow’s GDP advance release: if residential investment hasn’t fallen much, that’s a sign that Fed policy is too tight, not too loose. Why? Because it means that large negative effects of rate hikes are still in the pipeline 1/
— Paul Krugman (@paulkrugman) October 26, 2022
Underlying economic fundamentals have remained mixed; annual inflation beat investor expectations to hold near a four decade high of 8.2% in September, but the labor market stayed hot despite some cooling, according to the WSJ. The housing market, which has been hit particularly hard by the Federal Reserve’s campaign of interest rate hikes intended to combat inflation, showed signs that it was beginning to crack, as rental vacancies surged in the third quarter and existing home-sales plummeted in August.
“We’re going to see what looks like a pretty strong third-quarter number,” Joel Prakken, economist at S&P Global Market Intelligence told the WSJ. “It’s a little deceiving.”
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