The real gross domestic product (GDP) of the United States grew at an annual rate of 2.9 percent in the third quarter of 2022, increasing more than the advance estimate of 2.6 percent issued by the Bureau of Economic Analysis (BEA) last month, but expert analysts are warning against premature celebrations amid a looming recession.
During the second quarter, real GDP went down by 0.6 percent. “The second estimate primarily reflected upward revisions to consumer spending and nonresidential fixed investment that were partly offset by a downward revision to private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased more than previously estimated,” said the latest BEA report.
The last positive increase in the real GDP was in the fourth quarter of 2021. Industrial supplies and materials and nonautomotive capital goods were leading contributors to the increase in export of goods, while travel and financial services dominated service exports.
The increase in consumers spending on health care was “partly offset” by a decrease in motor vehicles and goods related to food and beverages.
State and local government spending went up with compensation hikes for state and local government employees, and increased investment in structures. The defense sector topped federal spending.
However, despite the increases in spending across board, there was a decline in residential fixed investment, led by new single-family construction.
Home prices in 20 major cities across the United States fell in September, according to data from S&P Dow Jones Indices, indicating a deceleration in the housing market.
Home prices have also performed poorly on a quarterly basis, according to a report by the Federal Housing Finance Agency (FHFA).
Imports, Personal Income, and Corporate Profits
The BEA reported that there was a notable decrease in imports of consumer goods, but it was partly offset by an increase in imports of services, mainly travel. “Imports turned down,” said the report.The current-dollar personal income and disposable personal income both increased $291.3 billion and $235.8 billion, respectively, in the third quarter.
“Personal saving was $520.6 billion in the third quarter, a downward revision of $67.6 billion from the previous estimate. The personal saving rat—personal saving as a percentage of disposable personal income—was 2.8 percent in the third quarter, a downward revision of 0.5 percentage point.”
Corporate profits with inventory valuation and capital consumption went down $31.6 billion in the third quarter. During the second quarter, it had increased $131.6 billion.
While profits of domestic financial corporations declined $32.9 billion in the third quarter, profits of nonfinancial companies went up by $6.1 billion.
The next and third estimate for third quarter 2022 will be released on Dec. 22.
But analysts had a different take on the report. “Beneath the apparent strength, the underlying details of the [GDP] report continue to paint the picture of a slowing economy, with domestic demand stalling under the weight of elevated inflation and the most aggressive tightening cycle by the Federal Reserve since the 1980s,” chief economist Gregory Daco of EY Parthenon wrote in a note to clients, cited MarketWatch.
“There’s a distinct possibility that third quarter could be the last hurrah for this post-pandemic economic expansion, as the U.S. faces material economic headwinds as a result of the Fed’s aggressive tightening cycle,” said Michael Reynolds, vice president of investment strategy at Glenmede, according to Barron’s.
