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NEW DELHI: The world’s biggest economy grew by 2.9% in the fourth quarter (Q4), data released by the US commerce department showed on Thursday.
For the full year 2022, the US economy expanded 2.1%, down from the 5.9% logged in 2021.
In comparison, in previous quarter (Q3), the US economy had a GDP growth of 3.2%.
From the above data, we can infer that even though the US economy maintained a strong pace of growth in Q4, but momentum appears to have slowed considerable.
The growth numbers come at a time when the US is staring at fears of a recession. With inflation soaring to 40-year high in the months after Russia’s invasion of Ukraine, the US Federal Reserve last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.5% range, the highest since late 2007.
Most economists now expect a recession by the second half of the year, though mild compared to previous downturns. According to a report by Reuters, this could be the last quarter of solid growth before the lagged effects of the Federal Reserve’s fastest monetary policy tightening cycle since the 1980s kick in.
Here are some key takeaways from the GDP report:
For the full year 2022, the US economy expanded 2.1%, down from the 5.9% logged in 2021.
In comparison, in previous quarter (Q3), the US economy had a GDP growth of 3.2%.
From the above data, we can infer that even though the US economy maintained a strong pace of growth in Q4, but momentum appears to have slowed considerable.
The growth numbers come at a time when the US is staring at fears of a recession. With inflation soaring to 40-year high in the months after Russia’s invasion of Ukraine, the US Federal Reserve last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.5% range, the highest since late 2007.
Most economists now expect a recession by the second half of the year, though mild compared to previous downturns. According to a report by Reuters, this could be the last quarter of solid growth before the lagged effects of the Federal Reserve’s fastest monetary policy tightening cycle since the 1980s kick in.
Here are some key takeaways from the GDP report:
- Retail sales have weakened sharply over the last two months and manufacturing looks to have joined the housing market in recession.
- While the labor market remains strong, business sentiment continues to sour, which could eventually hurt hiring.
- Consumer spending, which accounts for more than two-thirds of US economic activity, was the main driver of growth, mostly reflecting a surge in goods spending at the start of the quarter.
- Spending has been underpinned by labor market resilience as well as excess savings accumulated during the Covid-19 pandemic.
- Demand for long-lasting manufactured goods, which are mostly bought on credit, has fizzled and some households, especially lower income, have depleted their savings. Business spending also lost some luster as the fourth quarter ended.
- Residential investment suffered its seventh straight quarterly decline, the longest such streak since the collapse of the housing bubble triggered the Great Recession, but there are signs the housing market could be stabilizing.
- Mortgage rates have been trending lower as the Fed slows the pace of its rate hikes.
- Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 186,000 for the week ended January 21. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 20,000 to 1.675 million for the week ended January 14.
- Retail and motor vehicle sales data showed households are starting to retrench, the housing market continues to weaken and some businesses are reconsidering capital spending plans.
- Personal consumption expenditures price index, a key inflation metric for the Fed, rose at an annualized 3.2% rate in the fourth quarter, down from a 4.3% pace in the prior three months.
- The core index that excludes food and energy climbed at a 3.9% rate compared with 4.7% paces in the prior two quarters.
(With inputs from agencies)
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