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The US's third-quarter GDP growth obscures a slowdown in the economy

While overall GDP rose 2.6%, spending and investment are down
The US's third-quarter GDP growth obscures a slowdown in the economy
Photo: Spencer Platt/Getty Images (Getty Images)
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The US economy swung back to growth in the third quarter, with the economy expanding by 2.6%.

After shrinking for two consecutive quarters, the economy grew more than expected by economists, who had predicted a 2.3% jump. But key sectors, like consumer spending, are contracting. Most of the growth in the quarter came from an increase in exports.

That means a recession in coming months is not out of the question as the US Federal Reserve keeps hiking rates to combat stubbornly high prices.

Here’s a look at the parts of the economy that are slowing down:

Consumers are cutting back

The rebound in consumer spending a few months into the pandemic has been fading over the past few quarters. Consumer spending on goods dropped down for the second quarter in a row, by 1.2%.

Spending on services is stronger—it grew by 2.8% in the third quarter. Still, that coincides with the slowest pace of growth in two years for the sector.

Investment slowdown

Meanwhile, US gross domestic investment dropped by 8.5% as the housing industry pulled back and retailers adjusted their inventories due to overstock as supply chain backlogs have eased.

So while the overall GDP figure shows a growth, it may only be temporary.