Inflation, GDP and the Economy: What We Learned This Week

Several countries released reports on economic growth and inflation this week. The results were mixed. For example, the United States returned to growth, while France’s gross domestic product numbers fell short of expectations. But a trend emerged: Economies are showing signs of fragility as central banks around the world hit the brakes to tame inflation.

At first glance, Thursday’s gross domestic product report, which showed the economy returning to modest growth in the third quarter, would seem to support the argument that the United States is not yet in a recession. (Although G.D.P. contracted for two consecutive quarters in the first half of the year, a broader array of indicators were not consistent with a recession.) That said, there were some troubling signs lurking beneath the headline numbers. Consumer spending on goods fell for the third straight quarter, and the housing market slowed sharply. The report did little to assuage fears that the Federal Reserve’s aggressive campaign to tame inflation with rate increases would result in a recession.

Germany, Europe’s largest economy, defied expectations on Friday when it reported that its G.D.P. rose 0.3 percent in the third quarter. But economists warned not to overemphasize the growth, which was also an outlier; France and Spain, whose G.D.P. reports came out the same day, saw their economies register slower-than-expected growth. The takeaway is that these economies are weakening, economists said, and that a recession in Europe could arrive as soon as this winter.

Numbers on inflation and wages in the United States released on Friday showed that prices were still climbing at a brisk pace, and wages were edging higher. Those patterns could stoke fears of inflation becoming entrenched and self-fulfilling. The Personal Consumption Expenditure price index rose by 6.2 percent in the year through September, mirroring the increase of the month before. The Employment Cost Index, a quarterly inflation measure that tracks changes in wages and benefits, rose at an annual rate of 5 percent, down only slightly from the previous report.

Though the inflation data is disappointing to Fed officials, it doesn’t tell them much they don’t already know. Earlier this month, the Consumer Price Index, another inflation gauge, showed prices climbing at a blistering pace. Still, it could have an influence on officials’ thinking about rate decisions. While there are signs of some moderation, the U.S. labor market remains strong despite the Federal Reserve’s aggressive interest rate increases — suggesting that it will take time to see the full effects of officials’ efforts on the U.S. economy. At a meeting next week, Fed officials are poised to announce another three-quarter point increase to the central bank’s benchmark rate, which would be the fourth consecutive move of that size.

Policymakers in Europe have embarked on a campaign of rate increases much like the Fed’s. On Thursday, the European Central Bank, which sets monetary policy for the 19 countries that use the euro, raised interest rates by three-quarters of a point. European economies are struggling in particular with soaring energy prices as Russia throttled supplies of gas after it invaded Ukraine: According to data published on Friday, prices in Germany rose by 11.6 percent and in Italy by 12.8 percent in the year through October. And in France, which has relatively lower inflation because it is less reliant on Russian natural gas, inflation in October rose to 7.1 percent, from 6.2 percent, setting a record high since it started using the euro.