Share
Getting your Trinity Audio player ready...
|
The U.S. economy maintained its resilience from October through December despite rising interest rates, growing at a 2.6% annual pace, the government said Thursday in a slight downgrade from its previous estimate. But consumer spending, which drives most of the economy’s growth, was revised sharply down.
The government had previously estimated that the economy expanded at a 2.7% annual rate last quarter.
The rise in the gross domestic product — the economy’s total output of goods and services — for the October-December quarter was down from the 3.2% growth rate from July through September. For all of 2022, the U.S. economy expanded 2.1%, down significantly from a robust 5.9% in 2021.
The report suggested that the economy was losing momentum at the end of 2022.
Consumer spending rose at a 1% annual rate last quarter, downgraded from a 1.4% increase in the government’s previous estimate. It was the weakest quarterly gain in consumer spending since COVID-19 slammed the economy in the spring of 2020. Spending on physical goods, like appliances and furniture, which had initially surged as the economy rebounded from the pandemic recession, fell for a fourth straight quarter.
More than half of last quarter’s growth came from businesses restocking their inventories, not an indication of underlying economic strength.
Most economists say they think growth is slowing sharply in the current January-March quarter, in part because the Federal Reserve has steadily raised interest rates in its drive to curb inflation.
The resulting surge in borrowing costs has walloped the housing industry and made it more expensive for consumers and businesses to spend and invest in major purchases. As a consequence, the economy is widely expected to slide into a recession later this year.
The central bank has raised its benchmark interest rate nine times over the past year. The Fed’s policymakers are betting that they can stick a so-called soft landing — slowing growth just enough to tame inflation without tipping the world’s biggest economy into recession.
Analysts Expect a Downturn
Yet as higher loan costs spread through the economy, analysts are generally skeptical that the United States can avoid a downturn. The main point of debate is whether a recession will prove mild, with only minor damage to hiring and growth, or severe, with waves of layoffs.
The financial conditions that led to the collapse of Silicon Valley Bank on March 10 and Signature Bank two days later — the second- and third-biggest bank failures in U.S. history — are also expected to slow the economy. Banks are likely to impose stricter conditions on loans, which help fuel economic growth, to conserve cash to meet withdrawals from jittery depositors.
“The economy ended 2022 with marginally less momentum,” Oren Klachkin and Ryan Sweet of Oxford Economics wrote in a research note. ”Looking ahead, the economy will face the full brunt of tighter credit conditions and Fed policy this year, and inflation is set to stay above its historical trend.”
They added: “We expect a recession to hit in the second half of 2023.”
In the meantime, the job market remains robust and has exerted upward pressure on wages, which feed into inflation. The pace of hiring is still healthy, and the unemployment rate is near a half-century low. The confidence and spending of consumers remain relatively solid.
Thursday’s report from the Commerce Department was its third and final estimate of GDP for the fourth quarter of 2022. On April 27, the department will issue its initial estimate of growth in the current first quarter. Forecasters surveyed by the data firm FactSet have estimated that growth in the January-March quarter is decelerating to a 1.4% annual rate.
RELATED TOPICS:
Fresno County CHP Arrest Two in Interstate 5 Drug, Gun, and Counterfeit Money Bust
1 hour ago
Where Trade Talks Stand With Major US Partners Ahead of Tariffs-Hike Deadline
1 hour ago
DOJ Announces Arrest, Indictments in North Korean IT Worker Scheme
1 hour ago
Fresno Man Arrested in Clovis for Sex-Related Crimes Against Minor
2 hours ago
Suspect Identified in Ambush Shooting That Killed 2 Idaho Firefighters
2 hours ago
S&P 500, Nasdaq Close at Record Highs, Cap Best Quarter in Over a Year
3 hours ago
Musk Vows to Punish Lawmakers Who Back Trump’s Spending Bill
26 minutes ago
Categories

Musk Vows to Punish Lawmakers Who Back Trump’s Spending Bill

Fresno Man Sentenced to Nearly 6 Years for $4.2 Million Tech Startup Fraud

Bryan Kohberger Pleads Guilty in Murders of Four Idaho Students, ABC News Reports

Fresno County CHP Arrest Two in Interstate 5 Drug, Gun, and Counterfeit Money Bust
