GDP revised upward for Q3, but economic uncertainty remains
Here’s how to keep your finances on track in a turbulent economy
GDP increased in the third quarter, but Americans are still concerned about inflation.
Gross domestic product (GDP) increased by 3.2% annualized in the third quarter of 2022, according to the third and final estimate released by the Bureau of Economic Analysis (BEA).
That’s up from the previous estimate of 2.9% for the third quarter issued by the BEA in November.
The increase in real GDP was driven by increases in exports, consumer spending and nonresidential fixed investment, as well as government spending, the BEA said in its report.
Americans’ disposable personal income increased by $242.4 billion or 5.4% in the third quarter. This is $6.6 billion higher than the previous third-quarter estimate.
Still, rising prices have eaten into the earnings of many Americans, reports show. In fact, inflation has caused the largest pay cut for Americans in 25 years, according to data released earlier this year by the Federal Reserve Bank of Dallas.
Inflation increased by 7.1% year-over-year in November, as measured by the Consumer Price Index (CPI). And although this means inflation increased in November at the slowest pace this year, the inflation rate is still significantly higher than the Federal Reserve’s targeted rate of 2%, and about three times past the pre-pandemic average.
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Interest rates expected to keep rising in 2023
Americans may continue to face high interest rates in 2023. In an effort to lower inflation, the Federal Reserve has raised interest rates multiple times this year. Most recently, the Fed raised interest rates by 50 basis points earlier this month.
That spike drove the federal funds rate to a targeted range of 4.25% to 4.5%, the highest level since the Great Recession. And interest rates may continue to rise in 2023.
The Fed’s Chairman Jerome Powell told reporters at a press conference earlier this month that, "We have covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do."
But even if the central bank raises rates at a slower pace in 2023, any increase to the federal funds rate may have an impact on the interest rates consumers pay on products such as mortgages, personal loans or credit cards.
If you’re struggling with high-interest credit card debt, consider paying it down with a personal loan at a lower interest rate before rates go up any further. At Credible, you can compare loans from different lenders to find one that’s right for you.
JOB GROWTH SPIKES IN NOVEMBER, INTEREST RATES EXPECTED TO CONTINUE RISING
Recession may be on the horizon
As Americans battle with high inflation and rising interest rates, they soon may have to deal with a recession. A recession is typically defined as two consecutive periods negative economic growth.
The third quarter GDP increase of 3.2% precedes back-to-back economic contractions of 0.6% in the second quarter and 1.6% in the first quarter. That ignited a debate among experts as to whether the nation was in a recession. Many Americans believe the country is in significant economic decline.
More than half (53%) of Americans believe the U.S. is in a recession and only 18% say the economy isn't heading toward one, according to a survey released by the real-estate data company Clever.
Many experts believe the country is inching toward recession. Earlier this month, economists with Bank of America announced they expect a recession in the first quarter of 2023.
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