Will Daniel analyzes the recent economic report for the third quarter. In the report, there were promising signs that the economy was healthy and concerns of a recession were going down. The main factor in this reaction was a 2.6% increase in GDP. Daniel cautions that we should not get excited too quick about this growth.
The growth in GDP can be attribute to a change in the trade balance. Last quarter, exports severely exceeded imports, leading to a jump in GDP. Furthermore, other statistics warned that the economy is not as healthy as the GDP predicts. For example, the personal savings rate was 3.3%, which is about 6% below the average and is reaching historical lows. Micheal Gapen - the chief U.S. economist for Bank of America - explained his theory that these statistics are forecasting some form of recession in 2023. Daniel ends the article with a bit of good news; it is predicted that the worst of the inflation has occurred. This claim is supported with an approximate 3% decrease in PCE during the third quarter. A decreasing PCE signals that people are spending less, which means prices are decreasing.
In November, the FED is still expected to increase prices by 75 basis points in order to combat the United State's economic concerns.
https://finance.yahoo.com/news/american-economy-still-growing-not-193736097.html
Hello Olivia,
ReplyDeleteI agree in the sense that I think GDP is not accurately represented in the current situation we are in. Although the Federal reserve believes we have seen the worst of inflation already with a high of around 9% in the month of September it still isn't all that low at a current rate of 8.25%. It is true that the federal reserve is looking to raise the interest rate .75 percentage points which will inevitably lower that inflation rate. this is very tricky however because when IR rise than consumer saving increases which in turn may lower GDP overall. This is a very eye opening post. Good Job!
It is commonly thought that one of the easiest ways to identify a recession is when GDP has been declining for back-to-back quarters. However, GDP is growing and not declining. This is contradictory towards many other indicators in the economy that are pointing towards a recession. The condition of the economy will need to be watched despite the growth in GDP for the beginnings of a recession. It will also be interesting to see if the increase in interest rates will cause a decline in GDP as it combats inflation.
ReplyDeleteIt is important for consumers to remain calm in hearing the word recession. If consumers think we are going to have a recession, they will stop spending and manifest a recession into occurring. If we continue to spend, then we can fuel the economy and avoid recession.
ReplyDeleteI agree that this increase of GDP is not anything to get terribly excited about, but there may be hope for the near future of a soft landing. There is no real momentum with these new GDP numbers, but hopefully inflation can continue to fall
ReplyDeleteThe GDP is going because of trade growth and the actual factors of production seem to be slowing and prices are increasing. It will be interesting to see the GDP numbers in the next couple months and see if the trade balance can cover the slowly economy. The consumer has to spend to fuel the economy, but ultimately it is up to the firms and if they stop Investment for GDP that will cause a recession.
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