Status: 10/27/2022 3:32 p.m
With less than two weeks to go before the midterm elections, the US economy has grown again. According to an initial estimate, US gross domestic product rose by 2.6 percent in the third quarter.
The US economy grew faster than expected in the summer. Gross domestic product (GDP) increased by 2.6 percent in the third quarter, according to an initial estimate announced by the Department of Commerce in Washington today. Economists had only expected growth of 2.4 percent on average. In the first and second quarters, the American economy shrank by 1.6 and 0.6 percent, respectively. The American economy had thus slid into a recession, at least technically.
American consumers now spent more again, while companies invested significantly more. Exports surged last quarter despite the strong dollar. According to experts, this growth rate is not likely to continue – some even expect a recession.
Fed ahead of another rate hike
“The burdens caused by the US Federal Reserve’s massive tightening of monetary policy are now becoming more and more visible,” said economist Bastian Hepperle from Hauck Aufhäuser Lampe Privatbank AG. “The US economy is about to slip into recession.” The first warning signals can be read from the details of the summer quarter. Because in view of the persistently high inflation in the country, consumer sentiment has recently clouded over significantly.
At 1.4 percent, private consumer spending – the most important pillar of the economy – grew more slowly than in the previous quarter at 2 percent. High inflation is eroding consumer purchasing power. Although exports rose by 14.4 percent despite the strong dollar, imports fell by 6.9 percent at the same time. “The declining imports are more a sign of a weakening domestic economy,” said Hepperle.
The US Federal Reserve is currently aggressively raising interest rates to counteract the increase in consumer prices, which recently increased by 8.2 percent. The central bank is trying to curb growth. The Fed is poised for its fourth straight hike next week and could raise its key rate ceiling by 75 basis points to 4% next week. “Even if there is still positive growth in the current fourth quarter, the US economy will also slide into recession in the coming year,” said Thomas Gitzel, chief economist at VP Bank.
With interest rates rising, the cost of home loans in the US is now at its highest level in more than 20 years. Accordingly, the construction industry has cooled down considerably. Against this background, the International Monetary Fund (IMF) has downgraded its forecasts for the world’s largest economy. It is expected to grow by 1.6 percent this year and by just one percent in 2023.
Labor market almost unchanged
The Fed also bases its monetary policy decisions heavily on developments on the US labor market. She recently cited the solid labor market as an argument against the economy slipping into a deep recession. The situation on the American labor market has hardly changed. The number of initial jobless claims rose slightly by 3,000 to 217,000, the Labor Department said today. Analysts had expected an increase to 220,000 on average.
The level of aid applications remains low in a longer-term comparison, which at least speaks against an overheating of the labor market. The initial jobless claims are considered a short-term indicator for the development of the US labor market. The labor market in the world’s largest economy remains robust and many companies are complaining about a labor shortage.