OPINION
Market Rating Before FOMC MeetingJan 31
US Economy Out of Recession
As the US Department of Commerce reported yesterday, the country's gross domestic product (GDP) grew by 1.8 percent on an annual basis in the 3rd quarter preliminary reading, increasing by 2.6% compared to the previous quarter. GDP, which shrank by 0.6% in the previous quarter, was expected to increase by 2.4% quarterly during this period.
According to the Ministry's Bureau of Economic Analysis (BEA), the increase in exports was a major driver of growth in the 3rd quarter preliminary reading. Especially energy products, non-durable goods, and travel exports took the lead in this period.
In consumer expenditures, despite the increase in health and other service purchases, the decline in automotive and food purchases was a balancing act. On the other hand, non-resident fixed investments continued to increase moderately, while the increase in Federal government spending was driven by defense expenditures. However, the decline in housing and stock investments has been an important downward factor in growth.
In the third quarter, the GDP price index (Deflator) rose more modestly by 4.1% after the 9.1% increase in the previous quarter, while GDP sales increased from 1.3% to 3.3%. Real personal expenditures, the most important item of economic activity, decreased from 2.0% in the previous quarter to a growth of 1.4%, while the core personal consumption expenditures price index (PCE) increased by 4.5%.
The BEA's report shows that rising borrowing costs as a result of the US Federal Reserve's (FED) strong monetary tightening directly contributed to the slowdown in the housing market. On the other hand, the alleviation of price pressures caused businesses to decrease their stock investments.
Leading data for the third quarter has revealed that the world's largest economy is out of recession. On the other hand, the decrease in the core PCE deflator, which is the FED's inflation indicator, points out that price pressures are now experienced on a narrower basis. This, in a sense, is a signal that the FED may reduce the rate of tightening after the last 75 basis points interest rate hike at its meeting on November 1-2.
According to the Ministry's Bureau of Economic Analysis (BEA), the increase in exports was a major driver of growth in the 3rd quarter preliminary reading. Especially energy products, non-durable goods, and travel exports took the lead in this period.
In consumer expenditures, despite the increase in health and other service purchases, the decline in automotive and food purchases was a balancing act. On the other hand, non-resident fixed investments continued to increase moderately, while the increase in Federal government spending was driven by defense expenditures. However, the decline in housing and stock investments has been an important downward factor in growth.
In the third quarter, the GDP price index (Deflator) rose more modestly by 4.1% after the 9.1% increase in the previous quarter, while GDP sales increased from 1.3% to 3.3%. Real personal expenditures, the most important item of economic activity, decreased from 2.0% in the previous quarter to a growth of 1.4%, while the core personal consumption expenditures price index (PCE) increased by 4.5%.
The BEA's report shows that rising borrowing costs as a result of the US Federal Reserve's (FED) strong monetary tightening directly contributed to the slowdown in the housing market. On the other hand, the alleviation of price pressures caused businesses to decrease their stock investments.
Leading data for the third quarter has revealed that the world's largest economy is out of recession. On the other hand, the decrease in the core PCE deflator, which is the FED's inflation indicator, points out that price pressures are now experienced on a narrower basis. This, in a sense, is a signal that the FED may reduce the rate of tightening after the last 75 basis points interest rate hike at its meeting on November 1-2.
