- US gross domestic product grew at an annualized rate of 2.6% in the third quarter of 2022.
- That beats the 2.4% growth estimate.
Americans fearing a looming recession can breathe a little easier.
The economy's gross domestic product grew at an annualized rate of 2.6% in the third quarter of 2022, according to a Thursday report from the Bureau of Economic Analysis. That advance estimate is above the median estimate from economists surveyed by Bloomberg of 2.4%.
That comes after the US economy shrank by 0.6% and 1.6% in the second quarter and first quarter of the year respectively.
"The third quarter data is likely to look something like a normal healthy economy," Dean Baker, senior economist at the Center for Economic and Policy Research, wrote ahead of the advance estimate for the third quarter. "We should be past the big swings in net exports and inventories that drove the economy in prior quarters. We also should see a modest positive growth rate after two quarters of negative growth."
Exports helped boost the GDP print in the third quarter, the Bureau of Economic Analysis noted in the news release.
"Within exports of goods, the leading contributors to the increase were industrial supplies and materials (notably petroleum and products as well as other nondurable goods), and nonautomotive capital goods," BEA wrote, adding that travel and "other" business services were leading contributors to the increase seen in exports of services.
Unlike exports, imports declined in the third quarter of the year. That also helped boost the headline growth figure, since Americans buying goods and services that originated overseas counts against the country's domestic economic activity.
Consumer spending and business investment also increased this quarter, while residential investment declined. Reuters noted in its reporting that the increase in consumer spending slowed in the third quarter though: 1.4% in the third quarter versus 2.0% in the second quarter.
The decent output growth suggests that productivity, which had stagnated in the first half of the year, came back to life in the third quarter as well.
Baker wrote on Twitter after Thursday's release that "after two quarters of unprecedented declines in productivity, third quarter GDP implies strong productivity growth as hours growth was likely close to flat. This will go far in reducing inflationary pressures."
Prior to Thursday's news release, David Kelly, chief global strategist at JPMorgan Asset Management, also noted the estimate could be robust. Kelly said in a note that "this week's GDP report could show surprising strength, especially following two negative quarters and numerous predictions of imminent recession."
However, Kelly also wrote that the strong third quarter doesn't mean the US economy is out of the woods yet.
"Going forward, growth could well turn negative in the fourth quarter and will likely be very weak over the next year until housing starts bottom and the trade and budget deficits hit a trough as a share of GDP, likely sometime in the middle of 2023," Kelly stated. "Thereafter, slightly stronger economic growth could emerge."
Today's report is some good news for Americans worried about layoffs and other effects from a US recession as the return to positive GDP growth suggests that a downturn isn't here yet. Inflation is still high though, with the core Consumer Price Index at a 40-year high. Consumer confidence also declined in October per the Conference Board.
"In principle, this is the sort of GDP report we should be happy to see at this point in a recovery," Baker said ahead of the release. "However, with the Fed continuing to hike rates, and most of the impact of past rate hikes yet to be felt, this could be the last good report we see for a while."