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The specter of a coming economic slump haunts the return to growth shown in U.S. economic data for the third quarter.
The economy grew six-tenths of a percent in the third quarter, a 2.6 percent annual rate of growth after adjusting for inflation, the Commerce Department said Thursday. This is the first recorded annual rate of growth for gross domestic product this year, after the economy shrank at a 1.6 percent rate in the first quarter and a 0.6 percent rate in the second quarter.
The topline growth was roughly in line with consensus expectations, which is a bit of a relief after having so much economic data that has come in not just above or below expectations but out of the range of forecasts altogether. It’s tempting to say that this is an indication that forecasters are getting better at understanding our economic conditions or that conditions are becoming less unpredictable. But we’re reminded of the old adage about a stopped clock getting the time right twice a day. It’s too early to announce an end to the era of errant forecasts.
The growth in GDP is largely attributable to trade, one of the components of the broad measure of the economy that tends to be volatile from quarter to quarter. In the first quarter, net exports subtracted 3.2 percentage points from GDP. In the most recent quarter, it added 2.8 percentage points. As we pointed out in yesterday’s digest, many of those who downplayed the first quarter contraction relied on the role trade had played and described it as only a “technical” contraction.
