Economy grew 3.2% in Q3, an upgrade from earlier estimate
Shrugging off rampant inflation and rising interest rates, the U.S. economy grew at an unexpectedly strong 3.2% annual pace from July through September, the government reported Thursday in a healthy upgrade from its earlier estimate of third-quarter growth.
The rise in gross domestic product — the economy's output in goods and services — marked a return to growth after consecutive drops in the January-March and April-June periods.
Still, many economists expect the economy to slow and probably slip into recession next year under the pressure of higher interest rates being engineered by the Federal Reserve to combat inflation that earlier this year reached heights not seen since the early 1980s.
Driving the third-quarter growth were strong exports and healthy consumer spending.
Investment in housing plunged at an annual rate of 27.1%, hammered by higher mortgage rates arising from the Fed's decision to raise its own benchmark rate seven times this year.
Thursday's GDP report was the Commerce Department's third and final look at the July-September quarter. The first look at the fourth quarter comes out Jan. 26. Forecasters surveyed by the Federal Reserve Bank of Philadelphia expect the economy to grow again the last three months of the year — but at a slower, 1% annual rate.
We're using fewer cardboard boxes, an economic omen
Mills that churn out cardboard are slashing production worldwide, a worrying sign that global trade is slowing down.
North American companies that make the raw material for corrugated boxes shut down nearly 1 million tons of capacity in the third quarter, and a similar scenario is expected for the fourth quarter, Bloomberg Intelligence analyst Ryan Fox said. Prices are falling for the first time since 2020.
“Severe weakness in global box demand is an indication of how weak many parts of the global economy are,” said KeyBanc analyst Adam Josephson. “The recent history shows a significant amount of economic stimulus would be necessary to provide meaningful box demand, and we do not see that coming.”
Investors are watching closely for any harbingers of what is to come as fears mount that many of the world's biggest economies will tip into recession next year. Paper boxes are present at nearly every step of a good's journey through the supply chain, which makes paper a key indicator of how economies are faring. The signals are not encouraging.
Global demand for packaging paper is showing weakness for the first time since 2020, when economies reignited following the first hit of the COVID-19 pandemic. U.S. prices fell in November for the first time in two years and the U.S., the world's biggest exporter, reported 21% lower volumes sent overseas in October versus the previous year.
WestRock and Packaging Corp. have announced mill closures or idled machines. Klabin, Brazil's biggest packaging-paper exporter, is considering cutting its exports by as many as 200,000 metric tons next year, CEO Cristiano Teixeira said. That's almost half the amount exported in the 12 months ended September.
Much of the falloff in demand is attributed to the shrinking effect inflation has on consumer wallets.
Unemployment claims little changed in a week
Applications for U.S. unemployment benefits were little changed last week, remaining near a historically low level, underscoring businesses' reluctance to lay off workers in a supply-constrained labor market.
Initial unemployment claims increased by 2,000 to 216,000 in the week that ended Dec. 17, Labor Department data showed Thursday. The median forecast was for 222,000 applications.
Continuing claims, or the number of people who have already filed an initial application and are now claiming unemployment benefits, edged down to 1.67 million in the week that ended Dec. 10. It marked the first decline since the period that ended Oct. 1.
The measure has been slowly climbing, a potential indication that it has been more difficult for out-of-work individuals to find new jobs.