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Monday, March 27, 2023

U.S. economy grew by 2.9% in Q4 – Commerce Department

U.S. economy grew by 2.9% in Q4 - Commerce Department
© Reuters.

By Scott Kanowsky

Investing.com — U.S. economic growth eased, albeit by slightly less than expected, in the last three months of 2022, in a sign of the impact the Federal Reserve’s recent monetary policy tightening cycle is having on household and business spending.

The world’s biggest economy expanded by 2.9% on an annualized basis in the September to December timeframe, according to the Commerce Department’s preliminary gross domestic product report, down from 3.2% in the third quarter and above consensus estimates of 2.6%. Output previously contracted in the first half of the year.

The Commerce Department said the latest uptick in its GDP reading reflects a rise in consumer and government spending, as well as private inventory investment.

These were partly offset by a decline in residential fixed investment, especially in new single-family construction and brokers’ commissions. Exports also dropped, particularly in goods, reflecting a post-pandemic shift in spending patterns into services like travel and transportation.

The GDP figure ends a year of ebbing economic activity marked by soaring inflation that was spurred on by a sharp recovery from the pandemic. The Fed has raised interest rates by more than 4 percentage points since March to cool red-hot prices, which many economists predict could weigh on demand and potentially spark a recession in the U.S. later in 2023.

Recent data has stoked concerns that consumers – the key driver of U.S. growth – may be starting to feel the pressure from these trends. Retail sales dropped in December as shoppers spent less on items like furniture and electronics that they accumulated en masse during the COVID-19 crisis in December. Existing home sales also declined, while companies across the manufacturing and services sector have cut back on hiring and wage increases.

But inflation now looks to have peaked, leading many Fed observers to predict that the central bank will unveil a smaller quarter-point hike of borrowing costs at its policy meeting next week.

Elsewhere on Thursday, the number of Americans filing for unemployment insurance last week unexpectedly dropped, suggesting lingering tightness in the U.S. labor market.

Seasonally-adjusted initial jobless claims dipped to 186,000 in the week ending January 21 from an upwardly revised level of 192,000 in the prior week. Economists had predicted the figure would jump to 205,000. The rolling four-week average, which aims to adjust for volatility in the numbers, decreased by 9,250 to 197,500.

Source: Investing.com

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