U.S. Economy Grows, but Slowly

The U.S. economy grew slowly over the summer, adding to fears of a looming recession while simultaneously keeping alive the hope that one might be avoided.

Gross domestic product, adjusted for inflation, increased by 0.6 percent after six months of decline, slightly exceeding forecasters’ expectations. That suggests that a path to “soft landing,” in which policymakers cool off red-hot demand without snuffing out the recovery entirely, remains open, but narrow.

There are still plenty of economic headwinds. Consumer spending slowed as inflation cut into households’ buying power, and mortgage rates rose to the highest level since 2002, leading to a steep contraction in the housing sector. Big tech companies like Meta and Microsoft, which are usually two drivers of U.S. growth, are also signaling that tough times might be ahead amid inflation.

In Europe: The European Central Bank raised interest rates again. In just three months, the bank has raised rates at the fastest pace in its history.

Ripple effects: Interest rate increases by the U.S. Federal Reserve have hurt other currencies — including those of Japan, China and India — by making it harder for foreign borrowers with debt in U.S. dollars to repay their loans.