U.S. GDP Bump Confounds Expectations Despite Recession Fears

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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Despite fears of a recession looming, the U.S. economy has grown at a 2.9 percent annual rate in the months between July and September—even more than analysts had estimated a month ago.

On Wednesday, the Bureau of Economic Analysis (BEA) published revised GDP data for the third quarter of 2022, saying that U.S. real gross domestic product (GDP) increased at an annual rate of 2.9 percent—0.3 percent more than estimated in last month's advance data. U.S. GDP had fallen for two consecutive quarters at the beginning of the year, leading many to say the U.S. had slipped into a recession.

But the U.S. economy is moving forward, even if growth is slow.

U.S. economy
In this photo, freight rail cars sit in front of cranes at the Port of Long Beach on November 22, 2022 in Long Beach, California. Mario Tama/Getty Images

This GDP increase in the third quarter reflects growth in exports, consumer spending, non-residential fixed investment, federal government spending, and state and local government spending. Imports, on the other hand, fell.

According to the BEA, Wednesday's revision—which is to be followed by a third and final estimate in the coming month—is due primarily to upward revisions to consumer spending and non-residential fixed investment that "were partly offset by a downward revision to private inventory investment." Imports also decreased more than previously estimated.

This is the kind of modest growth expected by the Paris-based Organization for Economic Cooperation and Development (OECD) for the global economy this year amid the negative impacts of higher interest rates, surging inflation and Russia's invasion of Ukraine. According to the OECD, the global economy is expected to grow just 3.1 percent this year, compared to 5.9 percent in 2021.

But a slowdown of the growth rate of the U.S. economy—one of the 38 members of the OECD—is what many expect after the Federal Reserve's attempts to tame inflation by raising interest rates. A slowdown in the growth rate would lead to a deceleration of inflation, giving Americans some relief from the skyrocketing prices of goods and services.

The OECD predicts that the U.S. economy will grow only 1.8 percent this year, compared to last year's 5.9 percent. The next two years will be even lower, with an estimated growth of 0.5 percent in 2023 and 1 percent in 2024.

For the OECD, this slowdown in growth won't equal a recession—but many economists and analysts expect the U.S. to enter at least a mild recession next year.

Final figures on U.S. GDP in the third quarter of the year will be published next month.

The data was a further boost for President Joe Biden after U.S. consumer prices rose less than expected in October.

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more