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This may surprise you: the US economy is projected to have grown at an annual rate exceeding 2% in the three months from July to September.
Given the persistence of painfully excessive inflation and what appears to be a gentle beat of economic pessimism – albeit always punctuated by powerful jobs reports – the growth forecast for the third quarter may be much higher than many would expect.
The government's primary estimate for gross domestic product for these months will be released on Thursday, and economists largely expect it to essentially show a recovery from the stagnant first half of the year. Real GDP shrank at an annual cost of 0.6% in the second quarter of the year, following a reduction of 1.6% in the first 12 months. These two consecutive quarters of contraction fueled rumors that the economy might technically be in recession, notwithstanding the persistent energy of the labor market and the different indications that led economists to broadly agree that we had avoided this type of slowdown.
However, fears about the course of the financial system remained – nevertheless, the Atlanta Federal Reserve Bank projects that the economic climate grew at a rate exceeding 2.9% in the July-September quarter. Goldman Sachs economists estimate that GDP grew at an annual rate of 2.4%, while the consensus forecast of economists polled by Reuters is for an increase of 2.1%.
This amount of GDP will simply fall before the campaign season reaches its peak – and if it matches even the lowest of these forecasts, it will likely mean some welcome economic news for President Joe Biden and the Democrats.
But a strong record doesn't mean the economy is in the clear, and economists are increasingly pessimistic that the U.S. should be in a position to avoid a recession, given the Federal Reserve's crusade of hobby rate hikes to curb inflation. "The imminent GDP impact of better rates and a more favorable dollar is enormous," Jeffries economists Aneta Markowska and Thomas Simons said in a paper released by CNN.
The story continues
New research conducted with the help of the national affiliate of the firm Economics found that basically two-thirds of respondents say the country is already in recession or likely to fall into one within the next year. “The survey of fifty-five NABE individuals conducted from October 3-10 also indicated slower demand, an easing of labor market tightness, and a slight moderation in cost pressures,” analyzes information from Bloomberg.
The bottom line: this week's GDP report may also reveal a boom in suits, but fears are growing that the Fed is generally not in a position to project the "soft touch" it had hoped for and that the economic climate is more likely to see a contraction in 2023.
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