The economy grew at a 2.9% annual rate in the 3rd quarter, according to a revised Bureau of Economic Analysis report.
Democrats and allies of President Joe Biden said the figures demonstrated that the economy is not in recession. However, a notable economist said that when you dive further into the facts, the picture is not as rosy as they portray.
What are the specifics?
Tiffany Wilding, an economist who works for the investment management firm PIMCO, was a guest on the show “Squawk Box” on CNBC, and she argued that the report is misleading because key metrics cause the statistics to be skewed.
“There is some noise to consider because inventory and trade statistics may be quite unpredictable. When you look at the specifics of the third quarter GDP data, you’ll notice that growth was very low when you omit the more volatile categories,” She stated.
“Growth is sub-1% for the year as a whole — except certain categories, which we term ‘final domestic demand,'” she continued, noting that 2021 witnessed “strong” growth of 5%.
“Core growth has slowed considerably, and that’s even before you start to experience the consequences of Federal Reserve policy and Fed tightening because that occurs with a lag,” Wilding continued. “As a result, we believe the economy will enter a recession next year as financial conditions tighten.”
In point of fact, an economist working for the Obama administration named Jason Furman said on Twitter that the headline statistic of 2.9% growth provided by the BEA is a “less accurate” figure since it does not reflect a comprehensive perspective of the economy.
He pointed out that economic growth had been revised downward.
Economists have often predicted a recession due to the Federal Reserve’s actions to contain inflation, among other things. Conventional economic knowledge is that quickly raising interest rates will lead to a “hard landing,” which is economic jargon for a recession.
Fed Chairman Jerome Powell, on the other hand, signaled on Wednesday that the Fed will continue with modest interest rate rises next month, despite his belief that the Fed’s attempts to control inflation have been primarily ineffectual thus far.