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The first economy in the world had registered falls of 0.4% and 0.1% in the first two quarters of the year compared to the previous quarters, which is traditionally considered as a “technical recession”. In the third quarter, the country left the contraction behind.
A surge in exports and consumers spending more helped the United States quickly escape a short-lived technical recession it entered in the middle of this year.
Traditional economists consider that an economy technically enters a recession when it accumulates two consecutive quarters of declines in its Gross Domestic Product (GDP).
The United States did so in the first and second quarters of this year, when it experienced contractions of 0.4% and 0.1%, respectively, in the quarter-on-quarter comparison, that is, compared to the immediately previous quarter.
For months, doomsayers have been arguing that the US economy is in a recession and Congressional Republicans have been rooting for a downturn.
But with today’s Third Quarter GDP Report, we got further evidence that our economic recovery is continuing to power forward.
— President Biden (@POTUS) October 27, 2022
In the third quarter, on the contrary, its economic activity increased by 0.6% compared to the second and 2.6% if compared to the same period in 2021 thanks, among others, to higher federal and state public spending, according to the advance report of the Department of Commerce.
More spending, less consumption of goods
Consumer spending was one of the drivers of the economy between July and September. However, what improved was spending on services, such as health or travel, but not the consumption of goods, which are a good thermometer of the health of an economy.
Breaking news: The US economy rebounded in the third quarter, as GDP increased by 2.6% on an annualized basis between July and September, surpassing economists’ expectations https://t.co/e1E1c4oZhN
— Financial Times (@FinancialTimes) October 27, 2022
Spending on cars, food or beverages fell in the third quarter, marking the weakest level of domestic demand in two years. This is a clear consequence of the most aggressive monetary policy in a generation by the Federal Reserve with which it seeks to cool consumption and curb the highest inflation in 40 years.
A decline in residential investment for the sixth consecutive quarter under the weight of rising mortgage rates is another cause for the housing market to falter.
This Thursday, the mortgage manager Freddie Mac, closely followed by the market, reported that the average rate of a 30-year mortgage reached 7.08% this week in the United States, its highest level since April 2002 and more than double what it was a year ago.
With Reuters and EFE
