The U.S. economy grew at an annualized rate of 2.6% which was seen as particularly high in the third quarter and reversed two consecutive quarters of decline as increases in exports and consumer spending offset declines in housing investment.
This growth should reassure investors that the country is not yet stuck in a recession amid tightening financial conditions by the Federal Reserve. However, it does not mean that the risk of slowdown has passed.
Third quarter gross domestic product figures were well ahead of expectations. Economists polled by FactSet estimated that the economy grew at an annual rate of 2% in the third quarter amid forecasts of a fall in the trade deficit as a result of reduced imports. The increase followed declines of 0.6% and 1.6% in the second and first quarters, respectively.
According to experts, international trade is the main reason for the change in the third quarter. "Foreign trade is likely to play a very large role in driving third-quarter GDP growth, mostly due to the sharp decline in imports," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
He is of the view that the shipment of large items that were ordered in advance during the spread of the pandemic is starting to go smoothly. By the time the goods arrive, consumer spending is focused on services. Inventories are rising, and some retailers are cutting prices to clear shelves. As a result, imports have plummeted in recent months, Sheperdson said.
The US dollar index, which measures the US dollar against six major currencies, traded up 0.60% to trade at 110,200 following the GDP report.
