United States: GDP rebounds in Q3
October 27, 2022
GDP rebounded in Q3, expanding 2.6% in seasonally adjusted annualized rate terms (SAAR), contrasting the 0.6% contraction recorded in the second quarter and coming in slightly above market expectations.
Household spending increased 1.4% in the third quarter, which was below the second quarter's 2.0% expansion, with consumption likely weighed on somewhat by elevated inflation. Government spending rebounded, growing 2.4% in Q3 (Q2: -1.6% SAAR) thanks to stronger defense spending. Fixed investment contracted at a more moderate rate of 4.9% in Q3, following the 5.0% contraction recorded in the prior quarter. The ongoing decline was driven by lower residential investment amid tighter financial conditions, while non-residential investment accelerated.
On the external front, exports of goods and services growth sped up to 14.4% in seasonally adjusted annualized terms in the third quarter (Q2: +13.8% SAAR). Conversely, imports of goods and services deteriorated, contracting 6.9% in Q3 (Q2: +2.2% SAAR).
On an annual basis, economic growth was steady at 1.8% in Q3.
Economic growth is seen moderating in Q4, and the economy is then seen contracting in Q1 and Q2 2023, as the Fed continues to crank up interest rates. That said, the downturn should be mild; the jobs market is strong, and households are in better financial shape than they were on the eve of the Global Financial Crisis.
On the outlook, ING analysts said:
“Rising borrowing costs throughout the economy and the strong dollar are creating a massive headwind. At the same time, the weak external environment is adding to the downside risks to growth, led by Europe's forthcoming energy-driven recession, and China still being constrained by Covid containment measures. So while the US may have just exited a technical recession, the cold winds are set to get a whole lot chillier this winter and make recession feel much more real in early 2023.”