US GDP Q3 2022
US GDP Q3 2022 showed remarkable resilience in the face of rapidly tightening financial conditions by bouncing back strongly from two consecutive quarters of contraction in the July-September period, driven mainly by the external sector.
The US Department of Commerce reports that the annualized growth rate of the country’s gross domestic product
(GDP) in the third quarter was 2.6%, higher than the 2.4% gain economists had predicted. This result is expected to relieve recession worries, at least for the time being.
Examining the finer points of the data, we find that individual consumption expenditures rose 1.4% after rising 2% earlier, indicating that consumer resolve is weakening but not yet breaking, even as high inflation continues to strain wallets by reducing buying power.
As mortgage rates rose and housing demand slowed in the backdrop of tightening monetary policy, private domestic investment decreased by 8.5%, with most of the deterioration focused on the residential subcomponent, which plunged by 26.4%.
Meanwhile, commerce added 2.7 percentage points to GDP growth, with exports of goods and services outpacing the rise in imports during the period in question. While this is promising, the US dollar’s current strength makes it unlikely to last.
Considering everything, it seems that the robust GDP figure announced in US GDP Q3 2022 may exaggerate the growth pace. The ratio of exports to imports, a significant indicator of domestic demand, seems to support this view. This indicator, which removes the effects of government expenditure and inventories due to their volatility, showed a meager 0.5% growth following a 0.2% increase in the previous quarter, indicating that the economy remains sluggish.
The Federal Open Market Committee is unlikely to alter its near-term intentions in light of today’s statistics, with market pricing already factoring in the likelihood of a 75 basis point raise at their November meeting.
Nonetheless, following the meeting next month, the prognosis for monetary policy is less clear, as certain Fed members have started arguing for a slowdown in the pace of interest rate hikes out of worry that the aggressive tightening cycle will spark a severe downturn in the near future.
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