In spite of ongoing record inflation, soaring interest rates and looming recession worries, a new federal report released Thursday finds the U.S. economy grew in the third quarter of the year, bumping up by 2.6%.

The Commerce Department analysis found U.S. gross domestic product, a broad economic measure that tallies the value of finished goods and services produced across the nation, saw nominal growth over the last three months following declines in the first two quarters of the year.

According to the report, the increase in real GDP reflects increases in exports, consumer spending, nonresidential fixed investment, federal government spending and state and local government spending, which were partly offset by decreases in residential fixed investment and private inventory investment.

Does GDP growth mean a recession is off the table?

Two consecutive quarters of declining GDP, like what occurred in the U.S. in the first half of this year, is one of the bellwethers of the start of an economic recession. While a mixed set of factors helped drive overall economic growth in July-September, economists say the positive uptick is by no means a sign that recession worries are off the table.

Consumer spending is down slightly, but it has remained surprisingly vibrant throughout the year and has helped bolster the economy, even as prices on goods and services have soared and the price of debt, like interest rates on carryover credit card balances and mortgage rates, have hit the highest levels in decades. A still robust U.S. jobs market has also functioned as a balancing factor against other, negative economic indicators.

Per a new report from The Associated Press, the outlook for the overall economy remains gloomy. The Fed has raised interest rates five times this year and is set to do so again next week and in December. Chairman Jerome Powell has warned that the Fed’s hikes will bring “pain” in the form of higher unemployment and possibly a recession.

“Looking ahead, risks are to the downside, to consumption in particular, as households continue to face challenges from high prices and likely slower job growth going forward,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a research note.

Despite the swing in the headline GDP, conditions on the ground for consumers haven’t changed much, and concerns for an economic downturn remain, per CNN.

“I do think there’s roughly a 50-50 probability of recession in 2023,” Gus Faucher, senior vice president and chief economist at PNC Financial Services Group, told CNN. “We are starting to see job growth slow; housing is becoming more of a drag; consumer spending growth, although that’s holding up, is also slowing; and there’s a potential that as interest rates move even higher through the rest of this year, that we could see a recession some time next year.”

Inflation may be ebbing a bit

The new Commerce Department report notes a price index in the GDP data rose at a 4.1% annual rate from July through September, down from 9% in the April-June period — less than economists had expected and the smallest increase since the final three months of 2020, according to The Associated Press.

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The latest inflation report from the U.S. Labor Department, released earlier this month, found the consumer price index rose 0.4% in September and was up 8.2% from a year ago.

Mountain West states, including Utah, continued to see the highest regional inflation in the country in September, coming in at 9.6% up year over year.

Cost increases in shelter, food and medical care were the largest contributors to the monthly uptick, according to the Department of Labor.

While those costs were partly offset by a 4.9% decline in gas prices, food prices are continuing to rise up 0.8% from the month before. Energy prices fell 2.1% over the month along with gas prices, but natural gas and electricity costs increased. Year over year, energy prices increased 19.8% and food was up 11.2%.

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