GDP report Q3 released: US economy grows significantly, meaning fears of recession may quiet

WASHINGTON — The US economy expanded strongly in the second half of the year, marking a sharp turnaround from the sluggish first six months, official data showed.

US gross domestic product grew 2.6% in the three months ending in September, according to data released Thursday. In contrast, economic activity decreased by 2.2% in the first six months of the year.

The economic growth is at odds with the Federal Reserve’s efforts to reduce economic activity and reduce consumer demand in the fight against inflation.

The data comes less than two weeks before the midterm elections, possibly bolstering Democratic claims about the economy as polls show voters favor Republicans on the issue.

Fears of a looming recession may be muted in response to the data, which quells the rumble of two consecutive quarters of GDP growth that many consider to be signs of a recession.

The National Bureau of Economic Research, or NBER, a research organization that is widely recognized as the leading agency for identifying recessions, uses a more complex definition that takes into account several factors. Most economists believe the US has averted a recession so far this year.

However, the overall positive sign may overshadow the signs of an economic slowdown. Economic growth started at a slower pace due to the decline in trade, showing that the US reduced the gap between imports and exports, compared to the previous quarter. But this development also shows that US demand for imported goods has decreased.

In an attempt to dial back inflation, the Fed has raised interest rates by 0.75% at its last three meetings. Before this year, the Fed last matched this rate in 1994.

The increase in rates appears to have reduced large sectors of the economy, causing interest rates to rise and slowing the construction of new homes.

US hiring remains strong, however. Employers added 263,000 jobs in September and the unemployment rate fell slightly from 3.7% to 3.5%.

But public lending has eased in the wake of the slowdown at the start of the year, suggesting the Fed’s rate hikes may have begun to cool the labor market. By the end of 2023, the central bank’s move will raise the unemployment rate from the current level of 3.7% to 4.4%, the Fed predicted last month.