The U.S. economy grew slowly over the summer, adding to fears of a looming recession — but also keeping alive the hope that one might be avoided.
Gross domestic product, adjusted for inflation, returned to growth in the third quarter after two consecutive quarterly contractions, according to government data released Thursday. But consumer spending slowed as inflation ate away at households’ buying power, and the sharp rise in interest rates led to the steepest contraction in the housing sector since the first months of the pandemic.
The report underscored the delicate balance facing the Federal Reserve as it tries to rein in the fastest inflation in four decades. Policymakers have aggressively raised interest rates in recent months — and are expected to do so again at their meeting next week — in an effort to cool off red-hot demand, which they believe has contributed to the rapid increase in prices. But they are trying to do so without snuffing out the recovery entirely.
The third-quarter data — G.D.P. rose 0.6 percent, the Commerce Department said, a 2.6 percent annual rate of growth — suggested that the path to such a “soft landing” remained open, but narrow.
loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.