GDP gains 2.9% in year’s first half

Primary measures of U.S. third-quarter economic activity painted a mixed picture of the economy’s momentum after a lackluster first half of the year.

Inflation-adjusted gross domestic product, or the total value of all goods and services produced in the economy, increased at a revised 2.9% annualized rate during the period, Commerce Department data showed Wednesday. That reflected upward revisions to consumer and business spending, and compares with a previously reported 2.6% advance.

Meanwhile, a second key official gauge of economic activity — known as gross domestic income — rose at a 0.3% rate in the third quarter after falling 0.8% in the prior period. It’s a measure of income generated and costs incurred from producing goods and services.

The average of the two figures, a gauge the National Bureau of Economic Research’s Business Cycle Dating Committee uses when making any recession call, increased 1.6% after falling in the first half of the year.

Last quarter’s rise in gross domestic product followed two straight quarters of contraction. The decline in output had raised fears that the economy had slipped into a recession in the first half of the year, despite a still-robust job market and steady consumer spending.

Since then, however, most signs have pointed to a resilient if slow-moving economy, led by steady hiring, plentiful job openings and low unem

ployment.

Wednesday’s Commerce report showed that the restoration of growth in the July-September period was led by solid gains in exports and consumer spending that was stronger than originally reported.

“Despite higher borrowing costs and prices, household spending — the driver of the economy — appears to be holding, which is a positive development for the near-term outlook,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

For Federal Reserve policymakers raising interest rates at the fastest pace in a generation, the overall growth picture is one they want to see: in line with or slightly below the economy’s long-term trend, perhaps enough to slow inflation but not yet signaling a recession.

The GDP data showed personal consumption, the biggest part of the economy, climbed at a 1.7% pace, a slowdown from the prior quarter but up from the previously reported 1.4% increase.

Services spending increased, while outlays on goods fell for a third quarter.

Looking ahead, household spending is set to drive growth in the fourth quarter. Prior to the Wednesday economic data, the Federal Reserve Bank of Atlanta’s GDPNow model estimate for economic growth in the final three months of the year was 4.3%.Inflation-adjusted spending data for October will be released Thursday.

After-tax profits as a share of gross value added for nonfinancial corporations, a measure of aggregate profit margins, shrank in the third quarter to 14.9% from 16.2% in the second quarter. Across the economy, adjusted pretax corporate profits decreased 1.1% last quarter, marking the first decline since 2020, and were up 4.4% from a year earlier.

This year many companies have successfully passed along higher costs of labor and materials as they try to protect or even expand their profit margins. But some companies have recently indicated a hesitation to pursue further aggressive price hikes amid the uncertain economic environment.

DIGGING DEEPER:

■ Net exports contributed 2.93 percentage points to third quarter GDP.

■ Separate data out Wednesday showed the nation’s merchandise trade deficit widened in October to $99 billion, the most since June, from $91.9 billion.

■ Residential fixed investment shrank an annualized 26.8%, slightly weaker than initially forecast and subtracted the most from GDP since 2007.

The revised GDP data released Wednesday is the second of three estimates the Commerce Department will provide of economic expansion in the third quarter.