By Paul Wiseman – AP Economics Writer
WASHINGTON (AP) — The US economy grew faster than expected at an annualized rate of 2.6% in July-September, ending two consecutive quarters of economic contraction and overcoming very high inflation and interest rates.
Gross domestic product, the broadest measure of economic output, increased in the third quarter after contracting in the first half of 2022, according to Commerce Department estimates on Thursday. Stronger exports and stable consumer spending, supported by a healthy job market, contributed to a growth recovery in the world’s largest economy.
Consumer spending, which accounts for about 70% of US economic activity, grew at an annualized rate of 1.4% from 2% from April to June. Last quarter’s growth was also boosted by exports, which surged at an annual pace of 14.4%.
But housing investment plummeted at an annual pace of 26% as mortgage rates soared as the Federal Reserve raised borrowing costs to combat chronic inflation.
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The overall economic outlook is bleak. The Fed has hiked rates five times this year, and next week and he’s also due in December. Chairman Jerome Powell has warned that the Fed’s interest rate hikes will bring “pain” in the form of higher unemployment and a possible recession.
The government’s latest GDP report comes as Americans worried about inflation and recession risks begin voting in the midterm elections that will determine whether President Joe Biden’s Democrats will retain control of Congress. announced. Inflation has become a hallmark problem of Republican attacks on Democratic economic control.
Inflation remains at a 40-year high and steady price increases are putting pressure on households across the country. At the same time, rising interest rates are derailing the housing market and could do more widespread damage over time. The longer Russia’s war with Ukraine drags on, the darker the global economic outlook.
US economic growth last quarter reversed annual declines of 1.6% from January to March and 0.6% from April to June. One of the informal definitions of a recession is a series of quarterly declines in economic output. However, most economists believe the economy has avoided a recession, still focusing on a resilient job market and stable consumer spending. But most of them have expressed concern that a recession is likely next year as the Fed steadily tightens credit.
Preston Caldwell, head of U.S. economics at financial services firm Morningstar, said the economic contraction in the first half of this year was largely due to factors that did not reflect its underlying health, calling it a “real economy.” It very likely did not constitute growth.” slow down. ” He noted, for example, the decline in corporate inventories, which is a cyclical event that tends to reverse over time.
Rising borrowing costs have especially weakened the housing market. The average interest rate on a 30-year fixed-rate mortgage is approaching 7%, up from just 3.09% a year ago. Pre-owned home sales declined for the eighth straight month. Construction of new homes is down about 8% year-on-year.
Yet the economy remains strong. One is the crucial job market. Employers have added an average of 420,000 jobs per month this year. 2022 is set to be his second best year for job creation after 2021, according to Labor Department records dating back to 1940. His unemployment rate last month was 3.5%, which is in line with this. The lowest price in half a century.
But adoption is slowing. In September, the economy added her 263,000 jobs. This is a solid but lowest total since April 2021.
International events raise further concerns. Russia’s invasion of Ukraine has disrupted trade, raised energy and food prices, and created a crisis for poor countries. The International Monetary Fund this month downgraded its 2023 global economic outlook, citing war.
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https://theindependent.com/business/us-economy-returned-to-growth-last-quarter-expanding-2-6/article_639a2a73-3ea2-5f6a-b039-5ce2e53ab4b5.html The US economy returned to growth last quarter, expanding 2.6%