Supermarket in Atlanta, Georgia on October 14, 2022 – AFP
The US economy resumed growth in the third quarter of the year, after contracting in the previous two quarters, and it gives President Joe Biden some relief ahead of the midterm legislative elections, although a recession could only be a matter of time.
In the three months from July to September, the Gross Domestic Product (GDP) of the United States grew 2.6% at an annualized rate, according to the first estimate from the Department of Commerce released this Thursday (27).
The world’s largest economy is expanding for the first time since early 2022, and the recovery is stronger than anticipated. Analysts had expected GDP growth of 2.3% in the third quarter of the year.
U.S. GDP shrank in the first two quarters of 2022, falling 1.6% and then 0.6% from the immediately preceding quarter, but not falling into recession, according to the Biden administration and many economists.
While two consecutive quarters of falling GDP meet the commonly accepted definition of a recession, the strength of the labor market in particular means that the world’s largest economy does not fall into this category.
The calculation of GDP at the annualized rate, the measure preferred by the United States, compares with the previous quarter and projects the evolution throughout the year.
The growth is 0.6% if compared only to the previous quarter, as other advanced economies do.
– Balm for Biden –
President Joe Biden took advantage of Thursday’s data to praise the strength of the US economic recovery.
“For months, naysayers have argued that the US economy was in recession, and Republicans in Congress have spurred on” that idea, the president launched, campaigning for the Nov. 8 election.
“But today we have more evidence that our economic recovery continues to advance,” added the president.
These data show “positive dynamics in household spending, a rebound in business investment and persistent weakness in real estate investment,” Rubeela Farooqi, an economist at HFE, said in a note.
“Going forward, risks are downside, particularly for consumption, as households continue to face difficulties with high prices and a likely slowdown in employment growth” in the country, he added.
“The strength of the dollar and the weakness of global growth will limit exports,” anticipated Ian Shepherdson, economist at Pantheon Macroeconomics.
The increase is good news for Biden ahead of the election. But recession risks persist for the next few months.
Earlier this month, Biden himself even mentioned the possibility of a “very mild recession”.
The central theme of the American economy is inflation, which remains around its highest level in 40 years, at 8.2% in the 12 months to September in the United States, and erodes the purchasing power of families. The issue is delicate, above all, because the remedy for this price increase is to slow down the economy by raising interest rates.
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