U.S. economy doesn't look as good as GDP suggests

U.S. economy doesn’t look as good as GDP suggests

The U.S. economy grew at a seemingly snappy pace in the waning months of 2022, but it surely seems to have gotten off to a tepid begin within the new yr.

The first batch of studies on the well being of the economy within the first quarter counsel the U.S. might even contract once more. Gross home product, the official scorecard of types, additionally shrank within the first two quarters of 2022 earlier than rebounding within the second half of final yr.

Economists who work on the nation’s largest banks see bother forward. They forecast GDP will be flat in the first quarter and shrink in the second quarter.

S&P Global, one of many premier Wall Street
forecasters, mentioned the economy tailed off on the very finish of final yr and is on a “downward trajectory.”

The agency forecasts a 1.9% decline in GDP within the first quarter, however there’s greater than two months to go and lots can change in that point.

The gloomier forecasts stand in stark distinction to a seemingly robust 2.9% annual increase in growth in the 2022 fourth quarter, however as is commonly the case, the report wasn’t as good as it regarded.

For one factor, a big improve in inventories, or unsold items, generated about half of the expansion in GDP the fourth quarter.

Businesses are prone to cut back manufacturing within the first quarter owing to a softer economy. And they’ve an excessive amount of stock available after a slowdown in gross sales.

A falling worldwide commerce deficit and better authorities spending, in the meantime, additionally padded GDP within the fourth quarter. Neither is anticipated to contribute a lot within the early months of 2023.

Even shopper and enterprise spending wasn’t as robust as it regarded. Sales of products and providers to home consumers rose a scant 0.2% within the fourth quarter, down from a 1.1% achieve within the fall.

What’s extra, a lot of the improve in shopper spending occurred in October, however households in the reduction of within the ultimate two months of the yr.

“Looking to first quarter GDP knowledge, the momentum within the numbers isn’t wanting nice,” mentioned  James Knightley, ING chief worldwide economist. “We must see a flip rapidly in one thing to stop first-quarter GDP turning unfavorable.”