Washington: The US economy grew at a better-than-expected 2.6 per cent annual rate from July through September, snapping two straight quarters of economic contraction and overcoming punishingly high inflation and interest rates.
Thursday's estimate from the Commerce Department showed that the nation's gross domestic product the broadest gauge of economic output grew in the third quarter after having shrunk in the first half of 2022.
Stronger exports and steady consumer spending, backed by a healthy job market, helped restore growth to the world's biggest economy.
The latest GDP report comes as Americans, worried about inflation and the risk of a recession, have begun to vote in midterm elections that will determine whether President Joe Biden's Democratic Party retains control of Congress.
Inflation has become a signature issue for Republican attacks on the Democrats' stewardship of the economy.
Consumer spending, which accounts for about 70 per cent of US economic activity, expanded at a 1.4 per cent annual pace in the July-September quarter, down from a 2 per cent 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 per cent. Government spending also helped: It rose at a 2.4 per cent annual pace, the first such increase since early last year, with sharply higher defence spending leading the way.
Housing investment, though, plunged at a 26 per cent 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.
Overall, the outlook for the overall economy has darkened. The Fed has raised interest rates five times this year and is set to do so again next week and in December.
Chair Jerome Powell has warned that the Fed's hikes will bring pain in the form of higher unemployment. Concern about the likelihood of a recession next year has been growing.
Looking ahead, risks are to the downside, to consumption in particular, as households continue to face challenges from high prices and likely slower job growth going forward,'' Rubeela Farooqi, chief US economist at High Frequency Economics, wrote in a research note.
With inflation still near a 40-year high, steady price spikes have been pressuring households across the country. At the same time, rising interest rates have derailed the housing market and are likely to inflict broader damage over time.
The outlook for the world economy, too, grows bleaker the longer that Russia's war against Ukraine drags on.
Economists noted that the third-quarter gain in GDP could be traced entirely to the surge in exports, which added 2.7 percentage points to the economy's expansion.
Export growth will be difficult to sustain as the global economy weakens and a strong US dollar makes American products pricier in foreign markets.
Thursday's report offered some encouraging news on inflation. A price index in the GDP data rose at a 4.1 per cent annual rate from July through September, down from 9 per cent in the April-June period less than economists had expected and the smallest increase since the final three months of 2020. That figure could raise hopes that the Fed might decide it can soon slow its rate hikes.
Last quarter's US economic growth reversed annual declines of 1.6 per cent from January through March and 0.6 per cent from April through June. Consecutive quarters of declining economic output are one informal definition of a
recession.