The US grew 2.9% in the last quarter and shows strength despite slowing down

The US economy is under debate.

Thomas Osborne
Thomas Osborne
30 January 2023 Monday 11:19
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The US grew 2.9% in the last quarter and shows strength despite slowing down

The US economy is under debate. Recession or not? The data for the Gross Domestic Product (GDP) for the last quarter of 2022 showed this Thursday an annualized growth of 2.9% from October to December, which represents a slowdown compared to the previous 3.2%. This leaves the total for last year at 2.1%, a rate considered "more than decent" by analysts, although far from the 5.9% of 2021, which was the highest increase since 1984.

According to data from the Department of Commerce, this 2.9% is above all forecasts. This circumstance shows the solidity and strength of the US economy despite the aggressive campaign of the Federal Reserve (Fed) to stop the recession with high interest rates and the growing concern that growth will turn negative in months to come.

Since March, the Fed has increased interest rates by more than four points and is preparing to apply another quarter point at next week's meeting. But this rise in GDP, three tenths above the best forecast of 2.6%, demonstrates the resilience of the world's largest economy, which continues to expand at a good pace even though the cost of borrowing is much higher than it was last year. one year.

This barometer also seems to demonstrate the thesis of the White House, led by President Joe Biden and Treasury Secretary Janet Yellen, that it had not yet entered recessionary territory when, last year, the first two quarters registered both consecutive contractions, a negative balance of 1.6% between January and March and another of 0.9% from April to June. This chain, for many analysts, meant that it had already entered a recession.

One of the most observed elements to know if this recession is in the offing is the consumption data. This factor, a key driver of the post-pandemic recovery, expanded by 2.1% in the last quarter, slightly lower than the previous 2.3%, although it still reached positive terms when there were suspicions of a much larger fall.

So consumers spent at a calmer pace, employers cut hiring and the housing market weakened. Some of these setbacks are interpreted as a return to a more normal growth rate after an overvaluation due to the reopening after the confinement or the fiscal stimuli due to the health crisis.

Despite these signs of strength, many analysts are concerned about a possible recession in 2023. Economists like Bill Adams argue that the headwinds from the big jump in interest rates, the cut in consumer spending, more cautious, or economic vicissitudes in other countries have shown themselves to be serious problems for the US economy at the end of the year. This expert predicted that GDP will fall in the first half of the year. Data from this January, especially in manufacturing and households, would begin to show this cooling, always based on these theorists.

Others, on the other hand, stressed that the economy was much stronger at the end of 2022 than had been thought. The question, they remarked, is whether this resilience will be maintained throughout this year.

Inflation indicators are reading considerably lower. The personal consumption expenditures price index rose 3.2%, in line with expectations, but down from 4.8% in the third quarter. If food and energy are excluded, the weighted data increased by 3.9%, less than 4.7%.

Together with the boost from consumers, the increase in spending on private inventories, federal administration injections and non-residential fixed investment contributed to strengthening the GDP numbers. But a 26.7% drop in residential investment marks the severe decline in housing, which weighed on the rate of economic growth.