The US economy grew by 2.9% in the fourth quarter, more than expected


American financial system expanded once more Through the fourth quarter, recording robust development till the tip of 2022 regardless of client and company battles at a traditionally excessive fee. inflation And it rises rates of interest.

Gross home product — the broadest measure of financial exercise — rose at an annual fee of two.9% from October to December of final yr, in response to the Commerce Division. Information launched Thursday. The report confirmed that for 2022, GDP expanded by 2.1%.

“It looks as if the zeitgeist could be very unfavorable nowadays by way of the financial system, so I see individuals choosing on these numbers, and the numbers are good,” mentioned Robert Fricke, chief economist on the Navy Federal Credit score Union. “We should not anticipate them to be nice, as a result of the financial system is slowing down…however they’re nonetheless very optimistic.”

An growth of two.9% final quarter, whereas a reversal from the three.2% annualized development we noticed within the third quarter, represents a continued enchancment within the first half of the yr when GDP contracted.

After 2021, which noticed GDP develop by 5.9% — the very best fee since 1984 — it began final yr with two consecutive quarters of contraction. These declines raised alarm bells, as a result of two consecutive quarters of unfavorable financial development is the rule of thumb, nevertheless unofficialDefinition of sluggishness.

Nevertheless, 2022 was a yr of transition because the financial system continued to get better from the pandemic. Imbalances in commerce and inventories had a big impression on GDP knowledge within the earlier elements of the yr.

However firms have since tailored Snarls within the provide chainand customers have shifted their spending away from furnishings, bicycles, and different items and towards providers corresponding to journey and eating out.

John Lear, chief economist at Morning Seek the advice of, mentioned the robust financial development recorded throughout the fourth quarter was principally pushed by “an incredibly resilient client.”

Nevertheless, he mentioned there are indicators which can be beginning to fade.

Shopper spending within the fourth quarter, which was primarily concentrated within the service sectors, rose 2.1%, down from 2.3% within the third quarter, in response to a report Thursday.

“Shoppers are more and more struggling to deal with the lingering results of final yr’s worth hikes by counting on credit score and financial savings,” Lear mentioned. “With client demand prone to proceed on its downward trajectory, enterprise funding can be prone to gradual within the coming quarters, growing the chance of a recession this yr.”

Final yr, inflation It swelled to its highest degree in 40 years And it has remained stubbornly excessive, chipping away at customers’ cash and cash Confidence. the The Federal Reserve initiated On a heavy effort to lift rates of interest rapidly to assist curb demand and cut back inflation. Whereas financial coverage modifications require a while to take impact, some areas of the financial system (Particularly housing) has already grown a lot weaker.

Thursday’s report confirmed residential fastened funding declined 26.7% over the ultimate three months of the yr, barely narrower than the third quarter’s decline of 27.1%. Enterprise funding in tools fell 3.7% over the last quarter of the yr.

Frick mentioned inflation, which is slowing, stays the cardboard for 2023.

“Inflation is the bogeyman right here, and the smaller the bogeyman we have now, the much less stress we have now on all the opposite issues which can be holding again the financial system — client spending, enterprise spending, authorities spending,” he instructed CNN.

He mentioned he expects the primary six months of the yr to be very dynamic.

“A whole lot of it’ll rely upon which of these issues fade quicker: if it is inflation, we’re good; if it is client spending, we’re not nice.” “However I believe there are much more positives that we’re now than there have been in November.”

Economists had anticipated fourth-quarter gross home product to develop at an adjusted annual fee of two.6%, in response to Refinitiv.

Thursday’s GDP figures are the primary of three official estimates to be launched by the Commerce Division for the fourth quarter. GDP knowledge is usually revised, generally years later.

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