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The U.S. economic system completed 2022 in stable form even as questions persist over whether or not progress will flip damaging in the yr forward.
Fourth-quarter gross home product, the sum of all items and providers produced for the October-to-December interval, rose at a 2.9% annualized tempo, the Commerce Department reported Thursday. Economists surveyed by Dow Jones had expected a studying of two.8%.
The progress fee was barely slower than the 3.2% tempo in the third quarter.
Stock market futures rose following the report whereas Treasury yields have been principally greater as effectively.
Consumer spending, which accounts for about 68% of GDP, elevated 2.1% for the interval, down barely from 2.3% in the earlier interval however nonetheless optimistic.
Inflation readings moved significantly decrease. The private consumption expenditures worth index elevated 3.2%, in line with expectations however down sharply from 4.8% in the third quarter. Excluding meals and vitality, the chain-weighted index rose 3.9%, down from 4.7%.
Along with the enhance from shoppers, will increase in non-public stock funding, authorities spending and nonresidential fastened funding helped elevate the GDP quantity. A 26.7% plunge in residential fastened funding, reflecting a pointy slide in housing, served as a drag on the progress quantity, as did a 1.3% decline in exports.
“The mixture of progress was discouraging, and the month-to-month knowledge counsel the economic system misplaced momentum as the fourth quarter went on,” wrote Andrew Hunter, senior U.S. economist for Capital Economics. “We nonetheless count on the lagged affect of the surge in rates of interest to push the economic system into a light recession in the first half of this yr.”
The report caps off a risky yr for the economic system.
Following a 2021 that noticed GDP rise at its strongest tempo since 1984, the first two quarters of 2022 began off with damaging progress, matching a generally held definition of a recession. However, a resilient shopper and robust labor market helped progress flip optimistic in the last two quarters and gave hope for 2023.
A separate financial report Thursday highlighted a powerful, tight labor market. Weekly jobless claims fell by 6,000, all the way down to 186,000 for the lowest studying since April 2022 and effectively under the 205,000 Dow Jones estimate.
Orders for long-lasting items additionally have been significantly better than expected, rising 5.6% for December, in contrast with the 2.4% estimate. However, orders fell 0.1% when excluding transportation as demand for Boeing passenger planes helped drive the headline quantity.
Despite the pretty sturdy financial knowledge, most economists suppose a recession is a strong possibility this yr.
A sequence of aggressive Federal Reserve interest rate increases aimed toward taming runaway inflation are expected to return to roost this yr. The Fed raised its benchmark borrowing fee by 4.25 share factors since March 2022 to its highest fee since late 2007. Rate hikes usually function on lags, which means their actual impact might not be felt till the time forward.
Markets see a close to certainty that the Fed goes enact one other quarter share level enhance at its assembly subsequent week and certain observe that up with one more similar-sized hike in March.
Some sectors of the economic system have proven indicators of recession even although general progress has been optimistic. Housing in specific has been a laggard, with constructing permits down 30% in December from a yr in the past and begins down 22%.
Corporate revenue reviews from the fourth quarter are also signaling a possible earnings recession. With almost 20% of the S&P 500 corporations reporting, earnings are monitoring at a lack of 3%, even with income rising 4.1%, in accordance with Refinitiv.
Consumer spending is also exhibiting indicators of weakening, with retail gross sales down 1.1% in December.
