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The U.S. economy rebounded in July, August and September


We got some encouraging news about the U.S. economy today. Despite high inflation and rising interest rates, the economy grew at a pretty healthy clip in the late summer and early fall. That is a turnaround from the first half of the year, when it appeared to be shrinking. The outlook, though, may not be as rosy as today's numbers suggest. And for more on that, we're joined by NPR's Scott Horsley. Hi, Scott.


SUMMERS: So, Scott, when you look at this report, at first glance, it seems pretty positive. But tell us, how good is it?

HORSLEY: Maybe not quite as good as the headline number would suggest. We're talking about the Commerce Department's report on gross domestic product, which is the broadest measure of economic activity. And today's report shows the economy grew at an annual rate of 2.6% in July, August and September after shrinking in the two previous quarters. But a lot of that turnaround came from a big swing in international trade. Exports were way up in the third quarter while imports were way down. And that's not likely to continue, especially when a strong dollar is making it more expensive for people in other countries to buy American products. If you focus on domestic demand, which is really the heart of GDP, what you see is an economy that is growing but just barely.

SUMMERS: So, Scott, what is holding the economy back?

HORSLEY: Inflation is still high. That's cutting into people's purchasing power. And then the Federal Reserve is deliberately tapping the brakes in an effort to slow the economy and bring inflation under control. You know, the Fed has raised interest rates aggressively all through the summer and early fall. And you can really see the impact in the housing market. The housing component of GDP just plummeted in the last three months. I spoke with a Michigan homebuilder, Karen Schroeder, whose company, Mayberry Homes, is still working on the houses they started construction of months ago. But she told me the phone's not ringing much, and the new sales that would ordinarily carry her into the new year have dropped off sharply in the last few months.

KAREN SCHROEDER: As long as the rates keep going up, we're going to find people slowing down. It's slowing down our industry. It's slowing down our economy. And when housing slows down, everything does.

HORSLEY: It's true that when home sales drop off, so does demand for furniture and appliances and lots of other goods. And today's report does show a drop in spending on stuff in the last three months. Now, people are still spending money on services like travel and entertainment and health care. So even though prices are going up, people are still opening their wallets. And that's really important because consumer spending is still the biggest driver of the broader economy.

SUMMERS: And we've heard a lot of warnings about a possible recession being just around the corner. Scott, what does today's report tell us about that?

HORSLEY: We're not out of the woods. The core components of GDP show an economy that's moving just above stall speed, and it wouldn't take a lot to tip it into recession. The housing industry is probably there already. Freddie Mac said today that mortgage rates have topped 7% for the first time in two decades. That's more than double what a home loan cost last year. That's putting houses out of reach for a lot of people. Now, that said, Karen Schroeder told me she remembers selling houses when interest rates were 18%, so this is not her first taste of tough times. She had hopes she might ease into retirement without another downturn in the housing market. But it looks like that's not in the cards.

SCHROEDER: I've been in the industry since the '70s, and in 2008 I said that was the last recession I was going to do. And here I am. And I guess we're going to go through this one, too. Mark my words. You got it on tape. This is my last one.

HORSLEY: Now, most forecasters say if there is a recession in the coming year, it should be much shorter and shallower than the 2008 downturn. You know, one source of strength is the job market, which is still really strong, and unemployment is still historically low.

SUMMERS: That is NPR's Scott Horsley. Thank you.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
Erika Ryan
Erika Ryan is a producer for All Things Considered. She joined NPR after spending 4 years at CNN, where she worked for various shows and CNN.com in Atlanta and Washington, D.C. Ryan began her career in journalism as a print reporter covering arts and culture. She's a graduate of the University of South Carolina, and currently lives in Washington, D.C., with her dog, Millie.
Christopher Intagliata is an editor at All Things Considered, where he writes news and edits interviews with politicians, musicians, restaurant owners, scientists and many of the other voices heard on the air.
Lisa Lambert
Juana Summers is a political correspondent for NPR covering race, justice and politics. She has covered politics since 2010 for publications including Politico, CNN and The Associated Press. She got her start in public radio at KBIA in Columbia, Mo., and also previously covered Congress for NPR.