The Economy in The United States Has Grown but Not Enough to Withstand The Impact of Inflation

The Economy in The United States Has Grown but Not Enough to Withstand The Impact of Inflation by bloombergsubscription

The US economy stopped the streak of 2 consecutive quarters of decline with growth at an annual rate of 2.6%. But despite these numbers, there are other signs that consumers are suffering the effects of inflation and the housing market, which has been affected by high-interest rates.

This quarterly growth would signal to investors that the United States has not sunk into a recession despite the tough financial conditions put in place by the Federal Reserve.

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The danger of an economic slowdown has not passed, but such a market reaction is positive. Economists surveyed by FactSet estimated that the economy grew at an annual rate of 2% through September after registering falls of up to 1.6% in the year’s first quarters.

The rise in third-quarter economic growth reflected increases in exports, coinciding with expectations that the trade deficit had narrowed due to a sharp drop in imports, partly due to inflated inventories at some retailers. Far fewer imports of consumer goods led to the overall drop.

International trade may have fueled such strong growth in gross domestic product, but investors should examine other, more specific data.

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Consumer spending rose across the board, reflecting the flow of money toward health care and other services, but shoppers stopped spending on goods, with data showing declines in spending on cars, parts and food. These trends are important after the Fed’s interest rate decisions.

GDP growth was weighed down mainly by a decrease in residential housing investment, especially in the construction of single-family homes. The Fed’s hard-line shift in interest rates has had a knock-on effect on the mortgage market and created what some economists have called a housing recession.

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