The US economy grew 2.6% in the third quarter

Going forward, risks are on the downside, particularly for consumption, as families continue to struggle with high prices and slowing job growth.”

Rubeela Farooqi, economist de HFE.

The US economy resumed growth in the third quarter of the year after contracting in the previous two quarters and gives President Joe Biden a break before the legislative elections in November, however a recession may only be a matter of time.

During the three months from July to September, the Gross Domestic Product (GDP) grew 2.6% at an annualized rate (12-month projection if conditions were maintained at the time of measurement), according to the first estimate of the Department of Commerce.

The world’s largest economy expands for the first time since early 2022 and the rebound is stronger than expected. Analysts had expected growth of 2.3 percent.

The GDP contracted in the first two quarters of the year, where it fell 1.6% and then 0.6% compared to the immediately previous quarter, but without entering a recession, according to the Biden administration and many economists.

Sharp swings in trade and inventories were behind the contraction in GDP in the first half of the year.

Although two consecutive quarters of falling GDP correspond to the commonly accepted definition of a recession, the strength of the labor market means that the world’s largest economy does not fall into that category.

While the economy may not be in a recession, the risks of one have increased as the Federal Reserve (Fed) doubles down on interest rate hikes.

Growth in consumer spending, which accounts for more than two-thirds of economic activity, slowed to a rate of 1.4% from 2% in the April-June quarter.

Strength of the US economy

US Treasury Secretary Janet Yellen said the new GDP data shows the strength of the US economy, as well as some signs of a healthy slowdown that may have a positive impact on inflation.

“This is certainly a full-employment economy with a hot job market, which is good, but we want to see slower growth… It’s part of bringing inflation under control,” Yellen told reporters during a trip. to Cleveland to promote the economic policies of the Joe Biden administration.

Yellen expects the economy to slow further and says the government has fiscal space to respond if necessary, but warned that this should not go against monetary policy.

“We must be careful not to use fiscal policy to exacerbate an inflation problem,” Yellen said. “But if there was a deep recession and it was something that required a response, I think we have enough fiscal space to do it.”

For his part, President Biden presumed that the rise in GDP is proof that the recovery continues.

“My administration has passed laws that will lower prescription drug prices and health insurance premiums starting next year. We must do more,” Biden said in a statement.