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The Commerce Department released its advanced estimate of economic activity Thursday, revealing the U.S. economy grew 2.6 percent – in terms of real Gross Domestic Product (GDP) – in the third quarter. NAFCU Vice President of Research and Chief Economist Curt Long analyzed the data in a new NAFCU Macro Data Flash report.

According to the estimate, the rise in real GDP was mainly driven by net exports, which rose 2.77 percentage points, followed by personal consumption (+0.97 percentage points). This was partially offset by declines in residential investment (-1.37 percentage points) and the change in private inventories (-0.7 percentage points).

"While net exports was a drag on GDP over the first half of the year, it is now keeping GDP afloat," Long said. “Residential investment took a nosedive as builders reacted to skyrocketing mortgage rates.

“The labor market remains tight, helping to maintain consumption,” added Long. “However, consumers are leaning ever more on credit, and inflation continues to outpace wage growth.”

The Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation metric, fell to 4.2 percent. Meanwhile, core PCE inflation (excluding food and energy) fell to 4.5 percent.    

“Overall, this was exactly the type of report the Federal Reserve is looking for,” said Long. “Rate-sensitive areas are responding to tightening monetary policy, but the rest of the economy is moderating more slowly.

“It is still too early for the FOMC to think about a pivot, but after next week’s 75-basis point hike, this report would support a mild step down to a 50-point increase in December,” concluded Long.

For more economic updates from NAFCU's award-winning research team, view all of NAFCU's Macro Data Flash reports.