WASHINGTON ( Associated Press) – The US economy grew at an annual rate of 2.9% between July and September, the government said Wednesday, a healthy improvement on its forecast, despite high interest rates and chronic inflation.
The increase in US gross domestic product — the economy’s total output of goods and services — came after two straight quarters of contraction last quarter. That drop in output raised fears that the economy could slip into recession in the first half of the year, despite the fact that the job market remained strong and consumer spending was steady.
Since then, most signs point to a resilient, if slow-moving economy, fueled by steady hiring, plentiful job openings and low unemployment. The government report released on Wednesday showed that the improvement in growth in the July-September period was led by stronger growth in exports and consumer spending, which was stronger than initially reported.
“Despite rising borrowing costs and rising prices, household spending – the engine of the economy – appears to be holding up, which is positive for the near-term outlook,” said Rubeela Farooqi, US economist at High Frequency Economics.
This is the second of three estimates the Commerce Department will provide on economic expansion in the third quarter. In its initial estimate, the department calculated that the economy grew at an annual rate of 2.6% in the previous quarter.
According to a survey by the Federal Reserve Bank of Philadelphia, economists expect the economy to post a modest 1% annual growth between October and December. The country’s manufacturing sector is slowing despite an easing of shuttered supply chains since the economy recovered from the pandemic slump two years ago. And inflation threatens to undermine the crucial holiday shopping period. Retailers say shoppers wary of inflation are buying cautiously, many reserving lucrative deals.
But a recession, however mild, is expected in 2023 as the Federal Reserve pushes to rein in the worst form of inflation in four decades by aggressively raising interest rates.