The numbers: The economy grew at an annual 2.9% pace in the third quarter, updated figures show, and the U.S. is on track to expand again in the waning months of 2022 despite growing worries of recession.
Gross domestic product, the official scorecard for the economy, was revised up from a 2.6% rate of growth in the preliminary reading issued last month. GDP had shrunk in the first two quarters of the year.
The economy is forecast to expand again in the fourth quarter running from October to December, but estimates vary from as much as 4% to less than 1%. All figures are adjusted for inflation.
Key details: The main engine of the economy, consumer spending, increased at a solid 1.7% annual clip in the third quarter, the government said. Previously the increase was put at a softer 1.4%.
Business spending was weak, however. Investment fell sharply in large structures such as office buildings and oil rigs. The housing market also slumped due to soaring interest rates.
Corporate profits also fell 1.1% in the third quarter. Adjusted pretax earnings declined to an annualized $2.97 trillion.
The largest contribution to growth in the third quarter came from a huge drop in the trade deficit. It added 2.9 percentage points to GDP. The broader economy’s performance was less stellar, however.
Most other figures in the report were little changed. GDP is updated twice after the initial results are published. This was the first update.
Big picture: The Atlanta Federal Reserve’s GDP tracker predicts 4.3% growth in the fourth quarter, but S&P Global sees the economy expanding less than 1%.
What’s more, S&P is among many Wall Street firms that is predicting a recession in 2023 because of high interest rates. The Fed itself acknowledged a recession was possible at its most recent meeting of senior officials.
The Fed is jacking up rates to try to tame the worst inflation in 40 years, but the central bank has rarely succeeded in doing so without triggering a recession.
Looking ahead: “Beneath the apparent strength, the underlying details of the [GDP] report continue to paint the picture of a slowing economy with domestic demand stalling under the weight of elevated inflation and the most aggressive tightening cycle by the Federal Reserve since the 1980s,” chief economist Gregory Daco of EY Parthenon wrote in a note to clients.