US GDP grows 2.6% in the third quarter, but recession fears linger

The U.S. economy rebounded over the summer after shrinking for the first six months of the year, but the rebound does little to allay fears that the world's largest economy is headed toward a recession as it confronts painfully high inflation and rising interest rates.

Gross domestic product, the broadest measure of goods and services produced across the economy, grew by 2.6% on an annualized basis in the three-month period from July through September, the Commerce Department said in its first reading of the data Thursday. 

Refinitiv economists expected the report to show the economy had expanded by 2.4%.

The turnaround stemmed in large part from a narrowing trade deficit and increased exports, volatile measurements that do not accurately capture the underlying health of the economy. Exports climbed 14.4%, while imports dropped 6.9%. Economists think the surge in exports is just a one-off that masks weakening in the economy that will ultimately act as a drag on future growth.

"We don’t expect this strength to be sustained," said Paul Ashworth, chief North America economist at Capital Economics. "Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates. We expect the economy to enter a mild recession in the first half of next year."