Minneapolis
CNN
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The US economic system expanded again in the course of the fourth quarter, registering stable development to finish 2022 at the same time as shoppers and companies battled traditionally excessive inflation and rising interest rates.
Gross home product — the broadest measure of financial exercise — elevated at an annualized fee of two.9% from October to December final 12 months, in line with Commerce Division information launched Thursday. For 2022, GDP expanded 2.1%, the report confirmed.
“It seems that the zeitgeist is very negative these days on the economy, so I’m seeing people pick apart these numbers, and the numbers are good,” stated Robert Frick, chief economist at Navy Federal Credit score Union. “We shouldn’t expect them to be fantastic, because the economy is slowing down … but they were still very positive.”
Final quarter’s 2.9% enlargement, whereas a step again from the three.2% annualized development seen within the third quarter, represents continued enchancment on the primary half of the 12 months when GDP shrank.
Following 2021, which noticed GDP development of 5.9% — the very best since 1984 — final 12 months kicked off with two back-to-back quarters of contraction. These declines set off alarm bells, since two consecutive quarters of detrimental financial development mark a rule-of-thumb, however unofficial, definition of a recession.
Nonetheless, 2022 was a 12 months of transition because the economic system continued to get well from the pandemic. Imbalances in commerce and inventories had an outsized impact on the GDP information within the earlier components of the 12 months.
However companies have since readjusted to snarls in the supply chain, and shoppers have shifted their spending away from furnishings, bikes and different items and towards providers like journey and eating out.
The strong financial development registered in the course of the fourth quarter was largely fueled by a “shockingly resilient consumer,” stated John Leer, chief economist at Morning Seek the advice of.
Nonetheless, there are indicators that’s beginning to wane, he stated.
Fourth-quarter client spending, which was primarily targeted in providers sectors, elevated 2.1%, a tick down from the two.3% acquire within the third quarter, in line with Thursday’s report.
“Consumers are increasingly struggling to navigate the ongoing effects from the spike in prices last year by drawing on credit and savings,” Leer stated. “With consumer demand likely to continue its downward trajectory, business investment is also likely to slow in the coming quarters, increasing the probability of a recession this year.”
Final 12 months, inflation ballooned to a 40-year high and remained stubbornly elevated, chipping away at shoppers’ funds and their confidence. The Federal Reserve embarked on a heavy-handed effort to shortly ramp up rates of interest to assist tamp down demand and decrease inflation. Whereas financial coverage modifications require a while to take impact, sure areas of the economic system (notably housing) have already grown significantly weaker.
Thursday’s report confirmed residential mounted funding slumped 26.7% in the course of the ultimate three months of the 12 months, barely narrower than the third-quarter plunge of 27.1%. Enterprise funding in tools fell 3.7% in the course of the ultimate quarter of the 12 months.
Inflation, which is slowing, stays the wild card for 2023, Frick stated.
“Inflation is the bogeyman here, and the smaller the bogeyman we have, the less pressure there is on all of the other things that are holding up the economy — consumer spending, business spending, government spending,” he instructed CNN.
Anticipate the primary six months of the 12 months to be very dynamic, he stated.
“A lot of it is going to depend on which of these things fades the fastest: If it’s inflation, we’re in great shape; and if it’s consumer spending, we’re in not-so great shape,” he stated. “But I think there are a lot more positives that we’re looking at now than we were in November.”
Economists have been anticipating fourth-quarter GDP to develop at an annualized adjusted fee of two.6%, in line with Refinitiv.
Thursday’s GDP figures are the primary of three official estimates to be launched by the Commerce Division for the fourth quarter. GDP information is usually revised, typically years later.
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