Gross domestic product (GDP) rose 2.9 percent annually in the final three months of 2022 after a 3.2 percent increase in the third quarter, the U.S. Commerce Department’s initial estimate showed on Thursday. Personal consumption, the largest part of the economy, grew at a pace of 2.1 percent, which was less than expected, writes Bloomberg.
According to projections in a Bloomberg survey, analysts expect a 2.6 percent increase in GDP and a 2.9 percent increase in spending. About half of the GDP increase reflected a rise in inventories, while government spending was on par with the biggest increase since early 2021.
The report also pointed to some signs of stress for American consumers whose wages have failed to keep pace with inflation and continued to encourage them to withdraw savings accumulated from government pandemic relief programs. The burden of higher prices and higher borrowing costs is growing, indicating a weak economic outlook.
Bloomberg’s latest monthly survey shows economists expect economic activity to shrink in the second and third quarters, giving a 65 percent chance of a recession in the coming year.
As the Fed continues to raise interest rates to ensure the fight against inflation, housing and manufacturing are deteriorating rapidly, while banking and technology are laying off workers en masse.
The GDP report showed that the personal consumption expenditure price index, the Fed’s key inflation metric, rose at an annual rate of 3.2 percent in the fourth quarter, compared with 4.3 percent in the previous three months.
The Core Consumer Price Index (CPI), which excludes food and energy, rose 3.9 percent, compared with 4.7 percent in the previous two quarters. Monthly data for December will be published on Friday.