The US economy woke up to solid growth in the third quarter. However, this was mainly driven by foreign demand, while the tightening of monetary policy by the central bank has already had an impact on domestic demand.
The country’s GDP increased significantly
The gross domestic product of the United States increased by 2.6 percent on an annualized basis in the third quarter. This is a relatively large turnaround compared with the second quarter. In that quarter, the US economy contracted by 0.6 per cent.
Demand weakest in two years
The optimism is tempered somewhat by domestic demand, which, according to US Commerce Department data, is the weakest in two years. The tight monetary policy of the Federal Reserve, which is aggressively raising interest rates at the fastest pace in 40 years, is having an impact. Economic growth in the third quarter is thus largely attributable to foreign demand.
The data also showed that investment activity, particularly in housing, weakened significantly. This type of investment fell for the sixth consecutive quarter, the longest period of decline since 2006, when house prices and mortgage interest rates also peaked.
