The Fed did not stop GDP growth
Bureau of Economic Analysis announced today that seasonally adjusted U.S. real GDP rose 2.9% year-on-year in the third quarter. This makes two quarters in a row close to the historical average, a welcome relief from the moderately negative growth we started with last year.
New data called Ecobrowser recession indicator index decline to 8.3%, removing the warning signal of the previous two quarters. This is an assessment of the situation in the economy in the previous quarter (namely 2022:Q3). Although some observers believed that a recession could have begun in the US last year, the facts did not support their pessimism.
However, all is not well with the housing sector, which is the epicenter of the Fed’s war on inflation. The fall in new home construction has subtracted an average of 1.2% from the annual GDP growth rate during each of the past three quarters. The increase in interest rates by the Fed is definitely holding back growth.
The yield curve suggests that the market is betting on one or two additional modest rate hikes from the Fed, but by the end of the year it will reverse course and cut rates.