GDP grows 2.6%, marking the first period of positive acceleration in 2022

The US economy showed potential signs of recovery after posting third-quarter GDP (a sum of all the goods and services produced during the quarter) results that marked the first period of positive growth so far this year.

According to the Bureau of Economic Analysis, GDP grew at a 2.6% annualized pace for the period. The Dow Jones forecasted growth of 2.3%.

The results are partially attributed to a narrowing trade deficit, which economists warn won’t likely be repeated in future quarters.

Positive gains also resulted from increases in consumer spending, nonresidential fixed income, and government spending. Consumer spending decelerated slightly, increasing at a 1.4% pace for the quarter, declining from the 2% reported during the year’s second quarter.

Residential fixed income and private inventory results declined, managing to offset the gains in consumer spending.

“Overall, while the 2.6% rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained,” said Paul Ashworth, Chief North American economist at Capital Economics.

“Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates. We expect the economy to enter a mild recession in the first half of next year,” Ashworth added.

Markets saw a boost after the GDP report’s release, with the Dow Jones Industrial Average gaining more than 300 points in early trading.

Luke Tilley, Chief Economist at Wilmington Trust, warned that concerns about a potential recession wouldn’t necessarily be related to the quarterly results. “It comes from how much the Fed cranks up rates and what happens when firms and consumers respond to this,” Tilley said.

The Fed is expected to approve another 0.75-point interest rate hike next week.

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