Decreased growth and consumer spending has to occur in order to drive down inflation.Looking at the GDP numbers; Imports down due to large inventories; exports up (good) and consumer spending DOWN...................................uh oh!!!
The rise in third-quarter growth reflected net increases in exports, matching expectations that the trade deficit had narrowed as a result of a steep drop in imports, in part due to bloated inventories at some retailers. It was much fewer imports of consumer goods that led to the overall decline.
International trade dynamics may have been what ultimately delivered such strong growth in GDP, but investors would do well to examine some of the more telling components in the data.
Consumer spending increased overall, reflecting money flowing to healthcare and other services. But shoppers stopped digging as deep in their pockets to purchase goods, with data showing a deceleration of spending on cars, parts, and food and beverages. This was the third straight quarter in which goods spending fell, indicating a squeeze on consumers.
Amid signs that inflation remains persistently high—with two more interest-rate decisions due from the Federal Reserve this year—these trends are important.
As are indications that the U.S. is facing a slowdown in the housing market. GDP growth was primarily weighed down by a decrease in residential housing investment, and especially single-family home construction. The Fed’s hawkish shift on interest rates has had a knock-on effect on the mortgage market and created what some economists have called a housing recession.
The data out Thursday may be as good as it gets for a while.
“We expect 3Q22 to mark the peak in quarterly growth, as the cumulative effect of tighter monetary policy begins to push growth below potential,” said Ellen Zentner, the chief U.S. economist at Morgan Stanley. The bank expects to see GDP growth in the fourth quarter of just 0.8%.
“There’s a distinct possibility that Q3 could be the last hurrah for this post-pandemic economic expansion, as the U.S. faces material economic headwinds as a result of the Fed’s aggressive tightening cycle,” said Michael Reynolds, vice president of investment strategy at Glenmede.
The growth picture is likely to get gloomier as the full impact of the Fed’s monetary policy ripples across the economy—a process that can take many months or a year. The central bank is expected to hike rates by 75 basis points, or three quarters of a percentage point, for the fourth time since June next week. That, and another rate decision in December, will only show up in the data deep in 2023.
By that point, this year’s third quarter likely will look even better.
It's only been a TECHNICAL recession, folks. Nothing to see here!!!!
The real one is yet to come unless the settings change BIG TIME!!!!
btw: selling from the Strategic Reserve assisted the Exports number. Go figure!!!!
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