Expect the champagne corks to fly in the White House today.

Or at least expect the MSM flaks for the Democrats to pretend that celebrations are in order. According to the Bureau of Economic Analysis 3rd quarter GDP rose 2.6%, after two consecutive quarters of negative growth. Rose, that is, in this this early estimate that is subject to revision.

Far be it from me to suggest that government bureaucrats would massage the GDP numbers less than two weeks from an election day, but these early GDP reports are almost always revised because they are merely estimates released not long after the end of the period they describe. You don’t need to be a conspiracy theorist to know that these numbers are preliminary–the BEA says so itself.

What are the underlying factors that led to this bump in GDP? Well, one big source is federal government spending itself, unsurprisingly. Another factor is that Americans are buying fewer foreign products, presumably because they are feeling squeezed. Imports are subtracted from GDP numbers, so a reduction in certain types of consumption actually is recorded as a positive in the numbers. It’s clearly complicated stuff.

The increase in real GDP reflected increases in exports, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending, that were partly offset by decreases in residential fixed investment and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased (table 2).

As economic data the BEA estimate released today is only modestly useful, but the political impact is what most people will be focused on.

Ed, from his vacation in Florida took the time to give a brief analysis of the report. He is crazy to take time out from his break to do this, but you can’t survive long as a blogger without being a bit crazy and obsessive. I’ll just give you his (more educated) analysis:

BEA reports GDP growth at an annualized 2.6% rate in Q3. However, this is almost entirely due to another massive trade difference: exports up 14.4%, imports down -6.9%. This is not a normal status and we can likely expect another big swing to the opposite in Q4. (1/x)

— Ed Morrissey (@EdMorrissey) October 27, 2022

We saw the same thing in Q2, which added 1.4 points to GDP (and it still came in negative).

PCEs only up 1.4% in Q3, PCE goods at -1.2%, gross private investment -8.5% … these are not good results. (2/x)

— Ed Morrissey (@EdMorrissey) October 27, 2022

Final sales of domestic product looks good (3.3%), which would indicate some penetration into inventory. However, final sales to domestic purchasers only rose 0.5%, which means this looks more like an artifact of that trade imbalance. (4/x)

— Ed Morrissey (@EdMorrissey) October 27, 2022

So from my (vacation-limited) perspective, this is at best a mixed bag. This would be barely positive without that import/export imbalance. Businesses/investors are still battening down. Consumers are still cautious. Looks like stagflation, on the edge of something worse. (6/6)

— Ed Morrissey (@EdMorrissey) October 27, 2022

Democrats will undoubtedly be singing the tune “Happy Days are Here Again” and Republicans will grumble that the numbers are being massaged for political reasons. I don’t know enough to confirm or deny the latter contention, but I am quite certain the former is not true. Not even the financial press is really spinning it that way so far, because every respectable analyst is expecting a nasty recession. USA Today characterized it this way in the lede of their story:

After shrinking the first half of the year, the U.S. economy rebounded from July through September. But the performance likely marked a reprieve ahead of next year’s projected recession rather than a sign of a brighter outlook.

My own sense is that this report will have precisely zero political effect on the midterms. Voters aren’t sour on the economy because some statistician has told them that things are bad. Statistics barely make a mark on people’s perceptions because they are too abstract. 

Voters are sour because their own lives are being impacted by inflation and the worry that things are getting worse, not better. No economic analyst can tell them that their perception is wrong, because we react far more to personal experiences than dry academic analysis. In the 1992 election the Bush recession was actually “over” well before the election, by technical measures, but voters didn’t believe or feel it so George H.W. Bush lost to Clinton who was running on “the economy, stupid.”

Technical recessions and technical recoveries are the stuff of economists, not voters. So ignore all the speculation about what this report means politically. It means squat. Voters see their own finances getting worse and that is all that matters.

The tsunami is still coming. November 8th will be glorious.