The US Economy Isn’t Stronger, It’s Fatter
Commentary
The headline gross domestic product (GDP) figure for the third quarter seemed to signal a return to growth and a significant improvement from the previous readings. Real GDP increased at an annual rate of 2.6 percent in the third quarter of 2022, in contrast to a decrease of 0.6 percent in the second quarter, according to the Bureau of Economic Analysis.
However, the reality of the U.S. economy is that stagnation persists.
If we look at the components of GDP, a few one-off surprises may reduce the optimism about the headline. The entire improvement came from a bounce in net trade, as exports rose, mostly from natural gas and oil, and imports collapsed. This huge boost from the external sector is likely to reverse in the fourth quarter, as the nominal trade deficit has widened to $92 billion in September. The advance report shows that exports fell by 1.5 percent while imports rose by 0.8 percent. Furthermore, if the U.S. economy improves from lower imports in a quarter where domestic demand is stagnant, it clearly proves that overall demand is weaker….