US Economy Grows More Than Expected, Soothing Recession Fears
The U.S. economic system grew sooner than anticipated within the fourth quarter, led by resilient client spending and a decent labor market, suggesting that the nation hasn’t entered a recession.
Gross home product (GDP) grew by an annualized 2.9%, exceeding estimates of two.6%, though the tempo lagged the third quarter’s 3.2% enhance, the Bureau of Financial Evaluation (BEA) mentioned on Thursday. For all of 2022, GDP expanded 2.1%, dragged down by two consecutive quarterly declines within the first half of the yr. That’s down from 5.9% in 2021, when the economic system rebounded from the pandemic.
- U.S. GDP grew at a 2.9% annualized fee within the fourth quarter of 2022, exceeding projections of two.6% however decelerating from a 3.2% acquire within the third quarter
- For the whole lot of 2022, GDP expanded 2.1%, decelerating from a 5.9% progress fee in 2021 when the economic system rebounded from pandemic-related declines
- Client spending, which accounts for over two-thirds of GDP, was one of many important drivers of progress final quarter, offsetting declines in residential funding that dragged progress decrease
- The stronger-than-expected GDP report might immediate Fed officers to contemplate a extra hawkish coverage stance forward of subsequent week’s assembly of the Federal Open Market Committee (FOMC)
GDP consists of things that embrace client spending, authorities expenditures, mounted funding, enterprise inventories, and web exports. Client spending, which accounts for nearly 70% of the whole, rose 2.1% from the earlier quarter. Different contributors included non-public stock funding, nonresidential mounted funding, and authorities spending on the federal, state, and native stage. Features have been partly offset by declines in residential mounted funding, which tracks the development and sale of recent properties, as a slowdown within the housing market deepened.
Implications for Fed Coverage
The stronger-than-forecast GDP report might immediate Fed officers to undertake a extra hawkish financial coverage stance forward of subsequent week’s assembly of the Federal Open Market Committee (FOMC). Fed officers have penciled in two extra fee hikes of 25 foundation factors every on the subsequent two conferences of the FOMC, with the potential for a 3rd fee hike of equal magnitude in Might, in response to the CME Group’s FedWatch Software. That will lead to a terminal fed funds fee between 5% and 5.25%.