The economy grew 2.6% in the 3rd quarter (July – September). We estimated growth of 2.1%, so the economy slightly outperformed our expectations.
Why it matters: The strong 3rd quarter means the description of the current economic situation as reflecting second-hand pessimism is still accurate.
- Consumers and businesses feel bad about the economy when surveyed, but the underlying data, reflecting their actual spending activity, tell a more positive story.
Be smart: The strong growth in Q3 is a reversal from Q1 and Q2 when the economy contracted by 1.6% and 0.6% respectively.
- If the first half of the year is declared a recession, the expansion in Q3 means it ended in July. (There is still a 50/50 chance of a recession going forward.)
By the numbers: Growth came from gains in personal spending, business investment, trade flows, and government spending:
- Personal spending rose 1.4%. Spending on goods was down (autos were a big weight), but growth in services spending, particularly healthcare and “other” services, more than made up for that loss.
- Residential investment, unsurprisingly, fell sharply by more than 26%. The housing market is slowing rapidly as interest rates rise.
- Business investment was robust though, rising 3.7% on the back of spending on equipment and intellectual property.
- Inventories fell as businesses continue to draw down their existing stocks and supply chain issues remain a problem.
- Exports rose more than 14% and imports fell 7%, so net trade flows added substantially to growth in the quarter.
- Government spending added to GDP as well, especially large increases in defense spending.
—Curtis Dubay, Chief Economist, U.S. Chamber of Commerce
|
