GDP Grows 2.6% In Third Quarter but the Number Masks a Shocking Weakness in the US Economy

The Commerce Department reports that the US economy grew at an annual rate of 2.6% in the third quarter of calendar year 2022. This reverses a trend of declining GDP numbers — -1.6% in the first quarter and 0.6% in the second quarter — and prevents the Biden White House from having to officially acknowledge that the nation is in a recession.


Consumer spending, which accounts for about 70% of U.S. economic activity, expanded at a 1.4% annual pace in the July-September quarter, down from a 2% rate from April through June. Last quarter’s growth also got a big boost from exports, which shot up at an annual pace of 14.4%. Government spending also helped: It rose at a 2.4% annual pace, the first such increase since early last year, with sharply higher defense spending leading the way.

Housing investment, though, plunged at a 26% annual pace, hammered by surging mortgage rates as the Federal Reserve aggressively raises borrowing costs to combat chronic inflation. It was the sixth straight quarterly drop in residential investment.

While you can bet the Biden White House will be trumpeting these numbers, they aren’t good news. Consumer spending is down. Housing investment is down. Government spending, particularly in the defense sector, was the driving force behind the increase. One can’t help but wonder if the weapons and muntions sent to Ukraine and to NATO partners to backfill equipment shortages created by sending older arms to Ukraine were the reason for the increase in exports.


“Far from an indicator of growth, today’s GDP report signals decline. Consumer spending and business investment combined actually contributed -0.62 percentage points to GDP,” EJ Antoni, a research fellow for regional economics in the Center for Data Analysis at The Heritage Foundation, told The Daily Signal in a statement. (The Daily Signal is Heritage’s multimedia news organization.)

“Americans are steadily becoming poorer under Biden and in the third quarter were able to afford fewer imports from abroad,” he said.

This report gets the Biden White House around a difficult reality, but that reality will come back in full force in the next GDP report.


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