Minneapolis
CNN
—
US economy expand again in the fourth quarter, recording solid growth through the end of 2022 even as consumers and businesses grapple with historic highs inflationary and increased interest rate.
Gross domestic product – the broadest measure of economic activity – grew at an annual rate of 2.9% from October to December last year, according to the Commerce Department. data released Thursday. For 2022, GDP grew by 2.1%, the report showed.
“It seems like zeitgeism today is very negative for the economy, so I see people analyzing these numbers and the numbers,” said Robert Frick, chief economist at Navy Federal Credit Union. This is very good. “We shouldn’t expect them to be great, because the economy is slowing… but they are still very positive.”
Last quarter’s 2.9% growth, although a step back from the 3.2% annualized growth seen in the third quarter, represented a continued improvement in the first half of the year as GDP fell.
After 2021, with GDP growth of 5.9% – the highest since 1984 – last year started with two consecutive quarters of contraction. Those declines should raise alarm bells, as two consecutive quarters of negative economic growth mark a pattern, but Unofficialdefinition of recession.
However, 2022 is a transition year as the economy continues to recover from the pandemic. Trade and inventory imbalances had a big impact on GDP data in the early parts of the year.
But businesses have adjusted to growling in the supply chainand consumers have shifted their spending from furniture, bicycles and other goods to services such as travel and dining out.
John Leer, chief economist at Morning Consult, said: “The strong economic growth recorded in the fourth quarter was mainly driven by ‘amazingly resilient consumers’.
However, there are signs that it is starting to wane, he said.
Consumer spending in the fourth quarter, mainly focused on the services sector, rose 2.1%, down slightly from the 2.3% increase in the third quarter, according to a Thursday report.
“Consumers are finding it increasingly difficult to navigate the ongoing effects of last year’s price spike by taking out credit and saving,” said Leer. “With consumer demand likely to continue on a downward trajectory, business investment is also likely to slow in the coming quarters, increasing the likelihood of a recession this year.”
Last year, inflation Soars to a 40-year high and remain stubbornly high, denting consumer finances and confidence. The The Federal Reserve Shakes Hands in an aggressive attempt to quickly raise interest rates to help reduce demand and reduce inflation. Although monetary policy changes take some time to take effect, certain sectors of the economy (notably housing) has weakened significantly.
Thursday’s report showed residential fixed investment fell 26.7% in the last three months of the year, slightly below the 27.1% drop in the third quarter. Business investment in equipment fell 3.7% in the last quarter of the year.
Slowing inflation remains a danger factor for 2023, Frick said.
“Inflation is the boggart here, and the fewer boggarts we have, the less pressure on all of the other things that are holding the economy back — consumer spending, business spending, government spending. government,” he told CNN.
He said the first six months of the year will be very dynamic.
“Much will depend on which of these things fades fastest: If it’s inflation, we’re in good shape; and if it’s consumer spending, we’re in a bad place,” he said. “But I think there are more positive things we’re looking at now than there were in November.”
Economists had expected fourth-quarter GDP to grow at a revised annualized rate of 2.6%, according to Refinitiv.
Thursday’s GDP figures were the first of three official estimates released by the Commerce Department for the fourth quarter. GDP data is often revised, sometimes years later.
