General

According to the Huacheng Import and Export Data Observation Report, at 8:30 a.m. EDT on October 27, the US Bureau of Economic Analysis announced that the US economic growth in the third quarter was expected to reach 2.6%. This value is higher than the previous forecasts of several institutions. For example, Dow Jones had estimated 2.3%, while Bloomberg surveyed 2.4%. However, a week ago, the Federal Reserve Bank of Atlanta gave a growth forecast of 2.9% in the third quarter.

US exports are not sustainable

The US economy grew at - 1.6% in the first quarter and - 0.6% in the second quarter, which triggered a big debate on whether the US economy was in a technical recession. With the release of the third quarter GDP data, some people believe that it can ease the concern about the economy falling into recession.

When analyzing the causes of economic growth, American officials mentioned that industrial goods and petroleum related products are the main drivers of American commodity exports, while the growth of service exports is mainly tourism and finance. Consumer spending rose 1.4%, but was weaker than the 2% in the second quarter, mainly from the health care sector. Investment in intellectual products has also increased, mainly due to the impact of Biden's government's increased investment in high-tech fields, Huacheng Import and Export Data Observation reported.

In addition, it cannot be ignored that the defense expenditure in the third quarter also led to the growth of federal government expenditure, which is obviously related to the massive increase of military assistance by the United States in the Ukraine crisis. In the third quarter, the stock market return of the US aerospace and defense industries was the highest, 3.49%.

However, it is worth noting that the GDP data of the United States in the third quarter was positive, mainly because of trade, with imports declining 6.9% and exports increasing 14.4%. However, some analysts believe that under the prospect of a sharp slowdown in the global economy, US exports are not sustainable, and the reduction of domestic imports just reflects the weakening of US demand.

Therefore, the prospects for US economic growth in the fourth quarter are bleak, and the US economy will still fall into a mild recession next year. For example, according to a Bloomberg survey, the U.S. economy grew 0.6% in the fourth quarter and - 0.1% in the first quarter of 2023. Huacheng's import and export data observation report.

The Fed's interest rate hike is considered "too high, too fast, too far"

Another important factor leading to the slowdown of the US economy is the attitude of the Federal Reserve, which is widely expected to raise interest rates next week.

In the first half of 2022, the Federal Reserve raised interest rates by 50 basis points twice. From June to September, the Federal Reserve raised interest rates by 75 basis points in a row. At present, the federal funds interest rate has risen to 3.0-3.25%. The three rate hikes were the largest since the 1980s and were described as "too high, too fast and too far" by Stiglitz, the winner of the Nobel Prize for Economics.

The reason for the Federal Reserve to raise interest rates has been very firm, hoping to control inflation. However, because demand is not the only cause of this round of inflation rise in the United States, many scholars criticize the Federal Reserve for ignoring the geopolitical conflicts outside the United States, because the latter is beyond the control of the Federal Reserve.

The Federal Reserve's policy has also attracted criticism from members of Congress, especially Democrats. Some Democratic lawmakers warned Fed Chairman Powell not to fight inflation too much, because the Fed's continued interest rate hikes did not lead to a significant decline in inflation, but helped the economic recession.

In the upcoming mid-term elections in the United States, the issue of inflation is the most important concern of voters, so it has become the main handle for Republicans to criticize the Democratic government. With the release of GDP data in the third quarter, the situation seems to be developing in favor of the Biden government.

As for the employment data often used by the Biden government to prove the effectiveness of its economic policies, some commentators believe that it is exaggerated. Because although the employment market has recovered a lot, the growth rate of employment has been declining. The United States added 263,000 non farm jobs in September, compared with 315,000 in August. The Federal Reserve also predicted that if interest rates were raised again, the unemployment rate in the United States would rise from the current 3.5% to 4.4%. The bigger danger is that the real wages of American workers are falling.

Another indicator of the bleak economic outlook of the United States is the change in the yield of US government bonds in different years. Among them, the yield of the 10-year US treasury bond fell below 4% in the last week, even weaker than the yield of three-month US treasury bonds, and the yield was upside down. This at least shows that the market is not optimistic about the long-term economic prospects of the United States, and the short-term fluctuations are large. Huacheng Import and Export Data Observation Report.

The economic gap between China and the United States will narrow again

Three days before the US government released its third quarter GDP forecast, the Chinese government announced that the third quarter GDP growth rate was 3.9% month on month, which was 0.4 percentage points higher than the 3.5% reported by Reuters in mid October.

On October 11, the International Monetary Fund (IMF) made the latest assessment of the global economy in its latest World Economic Outlook, in which China's economic growth rate in 2022 will be 3.2% and the United States 1.6%. According to this forecast, China's total economic output will exceed 20 trillion US dollars this year and reach 80.9% of the total economic output of the United States.

In 2020, the proportion of China's total economy in the United States will exceed 70% for the first time. After two years of development, the economic gap between China and the United States will again narrow by about 10 percentage points, which is amazing.

The IMF predicts that China's economic growth rate will rise to 4.4% in 2023, while the U.S. economic growth rate will further decline to 1.0%. As a result, the gap between China's economic aggregate and the United States will still be further narrowed, Huacheng's import and export data observation reported.