USA: economy picks up after two quarters of contraction

The US economy grew at an annual rate of 2.6% between July and September, ending two consecutive quarters of contraction and outpacing very high inflation and interest rates.

The Commerce Department reported Thursday that the nation’s gross domestic product, the broadest gauge of economic output, grew in the third quarter after shrinking in the first half of 2022.

Stronger exports and steady consumer spending, supported by a healthy labor market, helped restore growth to the world’s largest economy.

Still, the outlook for the economy has darkened. The Federal Reserve has aggressively raised interest rates five times this year to fight chronic inflation and will do so again next week and in December.

Fed Chairman Jerome Powell has warned that the increases will bring “pain” in the form of higher unemployment and possibly a recession.

The government’s latest report on GDP comes as Americans, concerned about inflation and the risk of recession, have begun voting in a midterm election that will determine whether President Joe Biden’s Democratic Party retains control of the Congress.

Inflation has become a signature theme of Republican attacks on the way Democrats have run the economy.

With the inflation rate still near a 40-year high, steady price increases have been putting pressure on families across the country.

At the same time, rising interest rates have derailed the housing market and are likely to inflict further damage over time. Prospects for the world economy also grow bleaker the longer Russia’s war in Ukraine drags on.

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