U.S. Economy Grew 2.6% in Third Quarter, GDP Report Shows - WSJ

  

Category:  News & Politics

Via:  vic-eldred  •  one month ago  •  11 comments

By:   Sarah Chaney Cambon (WSJ)

U.S. Economy Grew 2.6% in Third Quarter, GDP Report Shows - WSJ
Consumer spending, economy's main engine, cooled compared with previous quarter

S E E D E D   C O N T E N T



The U.S. economy grew at a 2.6% annual rate in the third quarter but showed signs of a broad slowdown as consumer and business spending faltered under the weight of high inflation and rising interest rates.

Gross domestic product—a measure of goods and services produced across the nation—increased after declining in the first half of the year as the trade balance boosted growth, the Commerce Department said Thursday.

But  consumer-spending growth , the economy’s main engine, cooled in the third quarter compared with the previous quarter, as Americans  cut their spending on goods . They boosted their spending on services, albeit at a slower pace. Businesses cut their investment in buildings.

Economic uncertainty is growing and many economists are worried about  the possibility of a recession  in the coming 12 months. They expect the Federal Reserve’s efforts to combat high inflation by  raising interest rates  will further weigh on the economy.

“The overall state of the economy is deteriorating and a lot of it is just the weight of elevated inflation and higher interest rates,” said Richard F. Moody, chief economist at Regions Financial Corporation. “I don’t think that we’ve seen the full effects of higher rates work their way through the economy, so that’s why we have pretty low expectations for the next several quarters.”







The broader economic toll from rising rates can take months to materialize , but one of the sectors most sensitive to interest rates—housing—is showing signs of pain. Home sales posted  their longest streak of declines in 15 years  and the average rate on a  30-year fixed mortgage eclipsed 7%  Thursday for the first time in more than 20 years.







Residential investment fell at a 26.4% annual rate in the third quarter. Stocks fell in the third quarter and were  on track for their worst year  since the 2008 financial crisis.

The GDP report included evidence of the broad economic slowdown taking hold. Final sales to private domestic purchasers—a measure of consumer and business spending that gauges underlying demand in the economy—inched up at a 0.1% annual rate in the third quarter after it rose 0.5% in the second quarter and increased 2.1% in the first quarter.

So far this year, sentiment surveys of households and business leaders have slumped more than many measures of actual output and spending. Consumer sentiment  is hovering near historically low levels  seen during the 2007-09 turmoil. But consumers have continued to help drive broader economic growth by spending more on travel, dining out and other activities they had dialed back on earlier in the pandemic.

The trajectory of the economy largely depends on how consumers fare in the coming months. They are still benefiting from  a tight labor market  that is holding up stronger than many other parts of the economy as employers  continue to seek workers  in the midst of persistent staffing shortages.

“Wage growth is up, which is good for consumers, and that helps their balance sheet,” said Mark Begor, chief executive of the credit-reporting company  Equifax  Inc. on an earnings call this month. “Obviously, inflation is a bad guy, and it is hurting lots of consumers. But even with inflation, consumers are still out there spending and traveling and doing all the things that they do in their lives.”

Consumers remain resilient , said Bank of America Corp. Chief Executive Brian Moynihan in October on an earnings call.

Still, spending gains have moderated this year, and many economists expect consumers, as well as businesses, will retreat more as rising interest rates take effect. In addition, if the labor market takes a downward turn, consumers might rein in their spending.

Some companies—particularly in sectors that benefited from a consumer-goods binge earlier in the pandemic— are seeing a consumer pullback . Sales are down about 25% so far this year from the same period in 2021 at Altus Brands LLC, said Gary Lemanski, owner of the Grawn, Mich.-based company that manufactures and sells accessories for hunting, shooting and outdoor recreation.

Many of the factors that spurred a sales surge in 2020 and 2021—such as consumers’  extra cash from government stimulus , their time at home to go out in the woods and their lack of ability to spend money on services including travel—have since faded, he said.

Inflation is causing many consumers to cut back on discretionary purchases, which include products Altus sells, such as electronic ear muffs for hearing protection that can go for $200 to $250, Mr. Lemanski said.

“I talk with a lot of folks, and you just hear it over and over again: It’s tougher to make ends meet,” he said.

Technology companies that saw their sales and stock prices rise earlier in the pandemic are feeling the effects of a slowing economy.  Microsoft  Corp. on Tuesday  reported its worst quarterly earnings  in more than two years, and  Texas Instruments  Inc. said it was seeing  flagging demand  in personal electronics and from some other industrial buyers. Google reported its fifth consecutive quarter of  slowing sales growth , with its YouTube video platform posting a drop in advertising revenue.






Some of the economic slowdown this year reflects a return to a more normal rate of growth after the economy expanded at an unusually fast pace of 5.7% last year—as a result of trillions of dollars in pandemic-related stimulus, widespread business reopenings and Covid-19 vaccinations.
Inflation is denting some consumers’ appetite for big-ticket purchases. Most Americans say it is a bad time to buy a car or large household goods such as furniture, refrigerators or stoves, with a large share attributing their viewpoint to high prices, University of Michigan survey data show.

CarMax , a used-car retailer, saw its profit drop by more than 50% in its most recent quarter as tough economic conditions weighed on consumers.

“This quarter reflects widespread pressure the used-car industry is facing,” said William Nash, the company’s chief executive, on an earnings call. Higher prices, climbing interest rates and low consumer confidence “all led to a marketwide decline in used-auto sales,” he said.







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Vic Eldred
Professor Principal
1  seeder  Vic Eldred    one month ago

Not much help there for the democrats.

 
 
 
Snuffy
Masters Guide
1.1  Snuffy  replied to  Vic Eldred @1    one month ago

Well, you know the spin is that the GDP grew by 2.6% and the Democrats will use that.  But digging into the numbers shows that it's not all beer and skittles...

The third quarter GDP report does not show a stronger consumer or a healthy business climate. Rather, consumer expenditures grew at an anemic 1.4% and business investment fell for the second quarter in a row, dropping 8.5%. These two categories combined for a decrease of 0.62 percentage points to GDP while government spending grew 2.4%. Even including the nonproductive government sector, these three categories combined contributed -0.2 percentage points to GDP growth.

So, from where did all the growth come? A category called net exports. This is total exports minus total imports and is commonly called the trade deficit . It shrunk substantially in the third quarter, and that added to GDP.

Interpreting the actual impact of changes in net exports can be tricky. In this case, imports fell 6.9% as Americans were unable to afford as many foreign goods and services as before. This, combined with an increase in exports, added 2.77 percentage points to GDP—more than the total in the headline number.

 
 
 
Vic Eldred
Professor Principal
1.1.1  seeder  Vic Eldred  replied to  Snuffy @1.1    one month ago

You preceded exactly what you predicted.

We can all see the report is a mixed bag.

 
 
 
Dismayed Patriot
Professor Participates
1.2  Dismayed Patriot  replied to  Vic Eldred @1    one month ago
Not much help there for the democrats.

" The U.S. economy grew at a 2.6% annual rate in the third quarter"

“Wage growth is up, which is good for consumers"

" the economic slowdown this year reflects a return to a more normal rate of growth after the economy expanded at an unusually fast pace of 5.7% last year"

I'd say it's a mixed bag and not as "sky is falling" as Republicans, desperate for a return to power, have tried to frame it.

Conservatives cheer when trillions in tax cuts are given to the top 1% but when trillions are given to families in dire need due to a global pandemic which causes inflation to rise, they scream and yell at a supposedly inept administration. But it's nothing new, conservative Republicans have always been known for running up the deficit, giving tax cuts to the wealthy and then leaving Democrats to do the cleanup and take the blame.

"Reagan took the deficit from $70 billion to $175 billion. Bush 41 took it to $300 billion. Clinton got it to zero. Bush 43 took it from zero to $1.2 trillion. Obama halved it to $600 billion. Trump’s got it back to a trillion."

meter-mostly-true.jpg

PolitiFact | Here's how the deficit performed under Republican and Democratic presidents, from Reagan to Trump

index.cfm?a=Files.Serve&File_id=E2F59CD4-2406-4412-A06F-0061C70846F0

The Economy Under Democratic vs. Republican Presidents - The Economy Under Democratic vs. Republican Presidents - United States Joint Economic Committee (senate.gov)

 
 
 
Vic Eldred
Professor Principal
1.2.1  seeder  Vic Eldred  replied to  Dismayed Patriot @1.2    one month ago

Politifact is a far left spin machine

 
 
 
Texan1211
Professor Principal
1.2.2  Texan1211  replied to  Dismayed Patriot @1.2    one month ago
“Wage growth is up, which is good for consumers"

Inflation is also up, which negates any wage growth.

 
 
 
Vic Eldred
Professor Principal
1.2.3  seeder  Vic Eldred  replied to  Texan1211 @1.2.2    one month ago

They forgot the second part of the first sentence:

 but showed signs of a broad slowdown as consumer and business spending faltered under the weight of high inflation and rising interest rates.

 
 
 
Texan1211
Professor Principal
1.2.4  Texan1211  replied to  Vic Eldred @1.2.3    one month ago

They'll probably start touting house values next.

Like so many will be able to afford the astronomical interest rates to buy a house.

Or the increased taxes those higher values bring.

 
 
 
Just Jim NC TttH
PhD Principal
1.2.5  Just Jim NC TttH  replied to  Texan1211 @1.2.4    one month ago

I know like 7% now. I bought a home a year and a half ago and thought that 3.75 was bad. At the time they were all touting 3.25 and some even lower. Now I'm glad I did take it. Beside that, my home value has increased by $91K

 
 
 
Texan1211
Professor Principal
1.2.6  Texan1211  replied to  Just Jim NC TttH @1.2.5    one month ago

Home sales in my area seems to have slowed dramatically.

30 days on the market used to be long time, but now I see houses for sale for 2-3 months, and I live in a very nice neighborhood with good schools.

 
 
 
Just Jim NC TttH
PhD Principal
1.2.7  Just Jim NC TttH  replied to  Texan1211 @1.2.6    one month ago

Ours seems to be a little also but uptown Charlotte is filled with new apartment construction and townhomes are nuts everywhere. 

 
 

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