The Bureau of Financial Evaluation introduced at the moment that seasonally adjusted U.S. actual GDP grew at a 2.6% annual fee within the third quarter. That’s near the historic common (3.1%), and is a welcome sequel to the 2 quarters of falling GDP with which we began the yr.
Actual GDP development at an annual fee, 1947:Q2-2022:Q3, with the historic common (3.1%) in blue. Calculated as 400 occasions the distinction within the pure log of GDP from the earlier quarter.
Right here’s what the info seem like when plotted as year-over-year development charges.
The brand new knowledge helped the Econbrowser recession indicator index to ease down a bit of to 29.2%. That is an evaluation of the scenario of the financial system within the earlier quarter (particularly 2022:Q2). The index takes into consideration the truth that the Q3 development was constructive to refine the evaluation of the place the financial system was final quarter. When Marcelle Chauvet and I first developed this index 17 years in the past, we introduced that we might solely declare a recession to have began when the index rises to 65% (see pages 14-15 in our unique paper).
The index itself isn’t revised, although every quarter’s updates and revisions to GDP enable an improved evaluation of the financial situations a number of quarters earlier as nicely the worth of the index that we announce in actual time based mostly on the preliminary GDP report. If subsequent knowledge ship the real-time indicator above 65%, we might use the total vary of revised historic knowledge out there at that date to announce the date at which the recession doubtless began. Right here at Econbrowser we’ve adopted that process to the letter as the info had been launched in actual time over the past 17 years, efficiently courting the start and finish of the 2 recessions since we began this weblog.
GDP-based recession indicator index. The plotted worth for every date is predicated solely on the GDP numbers that had been publicly out there as of 1 quarter after the indicated date, with 2022:Q2 the final date proven on the graph. Shaded areas characterize the NBER’s dates for recessions, which dates weren’t utilized in any means in establishing the index.
The current hikes in rates of interest have introduced the U.S. housing market down fairly shortly. The drop in new residence building subtracted 1.4% from the 2022:Q3 annualized GDP development fee.
One other channel by which increased rates of interest can sluggish GDP development is thru a stronger greenback, which discourages U.S. exports and encourages U.S. imports. However surprisingly, exports elevated and imports decreased in Q3, between them including +2.8% to the annual GDP development fee. Almost half of the rise in exports got here from petroleum and merchandise, because the U.S. stepped into the hole created by disruptions in Russian shipments. Provide-chain points might have contributed to the decline in imports. With the headwinds from a robust greenback, it’s laborious to see a giant constructive contribution from commerce persevering with.
Delicate climate has eased among the challenges Europe was dealing with with pure gasoline cut-offs from Russia, no less than for now. However Europe’s power scenario will nonetheless be tough in 2023 and might be a drag on Europe and the world financial system. China’s ongoing efforts to curtail COVID are one other very severe headwind to world financial development. When added to the persevering with results of the financial contraction, a recession throughout the subsequent yr is a definite chance.
So whereas the Q3 GDP development is welcome, our Little Econ Watcher stays very apprehensive.
