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GDP Updates: U.S. Economy Grew at 2.9% Annual Rate

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real gross

Domestic product

Quarterly change

annual rate,

adjusted for inflation

real gross domestic product

Quarterly change in inflation-adjusted annual rate

Economic growth remained strong at the end of last year as a strong job market and lower inflation allowed Americans to continue spending despite fears of a recession.

Gross Domestic Product of the United States, adjusted for inflation, increased at an annualized rate of 2.9% in the fourth quarter of 2022, the Department of Commerce said Thursday. Consumer spending, the cornerstone of the US economy, grew at a rate of 2.1%. The data is preliminary and will be revised at least twice in the coming months.

“The economy continues to gain momentum,” said Michael Gappen, chief U.S. economist at Bank of America. am.”

Healthy fourth-quarter growth capped a rebounding year after economic output contracted in the first half, sparking rumors of a recession. Measured from the fourth quarter of the previous year, GDP grew by 1% for the full year, down sharply from 5.7% growth in 2021.

The 2022 seesaw pattern was caused by large swings in trade and inventories, historically the most volatile components of GDP, wars in Europe, inflation around the world, and a series of aggressive actions by the Federal Reserve. resilient in the face of significant interest rate hikes.

“2020 was the pandemic. 2021 was the recovery from the pandemic. 2022 was the year of transition,” said Jay Bryson, chief economist at Wells Fargo. “It will go down in history as an OK year.”

real gross domestic product

Annual change, adjusted for inflation

real gross domestic product

Annual change, adjusted for inflation

The initial rebound from the pandemic recession has been much stronger in the United States than in many other countries in the world. The gap widened last year as it constrained the growth of

The question now is whether US resilience will continue into 2023. Inflation is still too high by many measures and the Fed is expected to keep raising interest rates to keep prices down. A parliamentary showdown over raising the debt ceiling could cause further turmoil in financial markets and could spark a crisis if lawmakers fail to reach a deal. Many forecasters say a recession is likely, perhaps later this year.

There are already signs of tension, especially in sectors most sensitive to rising borrowing costs. Construction activity and home sales have slowed significantly.tech company announced tens of thousands of layoffs in the last few weeks. Manufacturing output fell in He in November and He in December.

Even the trusted consumer spending engine may be starting to lose momentum. Decreased retail sales As pandemic-era savings dry up, Americans are increasingly turning to credit cards.

“The savings rate continues to fall,” Mr. Bryson said. “Credit card debt continues to grow. Those trends — they’re not sustainable. Consumers seem to keep using borrowed time.”

Consumer spending in the fourth quarter was strong, but below forecasters’ expectations. This could reflect a further slowdown, or even a complete decline, in the final months of the year. Half of overall growth in the fourth quarter was due to companies building inventory, indicating that many companies may have had lower-than-expected sales during the holiday season. .

But economists say a recession this year is inevitable. Inflation has started to moderate in recent months, despite unemployment remaining low. This would allow the Fed to raise rates more slowly and reduce the risk of overcooling the economy.

“Even with a strong labor market, there’s good news on inflation,” said Wendy Edelberg, director of the Hamilton Project, the economic policy arm of the Brookings Institution. I will be a little more patient.”

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