The US economy entered 2023 with less momentum, with growth slowing in the middle High interest rates And high rates of inflation.
we gross domestic product It grew at a seasonally adjusted annual rate of 2.9% in the final three months of 2022, down slightly from the annualized rate of 3.2% in the third quarter, the Commerce Department said Thursday.
Consumers, the main driver of the economy, spent at a solid but slower pace in the last quarter of 2.1%. Business investment rose at a weaker rate of 0.7%, as companies cut their spending on equipment. The housing market continued to decline.
The last quarter capped a year of economic slowdown, reflecting in part a return to a more normal pace of growth after production picked up amid business reopenings, fiscal stimulus, and the pandemic subsiding in 2021. Economic output grew 1% in the fourth quarter of 2022 compared to the previous year, down from the previous year. From growth of 5.7% in 2021 and 2.6% in 2019 before the pandemic.
The job market is still running strong, though Unemployment claims– The agent for layoffs – fell last week and remained near historic lows despite the growing number Company layoff announcements. Workers continue to reap significant wage gains, which helps consumer spending.
Despite some signs of resilience, many economists are concerned about it Possibility of a US recession this year. They expect the Fed’s efforts to rein in High inflation Rapid increases in interest rates will lead to broad cuts in spending and job losses.
The Fed is on the right track to slow interest rate increases When it meets next week it discusses how high it will go this year as it tracks the path of inflation.
“Headwinds from the big jump in interest rates, consumers cutting discretionary spending and weak economies abroad were big problems for the United States in late 2022,” said Bill Adams, chief economist at Comerica Bank. “I expect real GDP growth to turn negative in the first half of this year.”
we Stocks opened higher Thursday as investors understood the economic numbers and corporate earnings.
The Commerce Department said final sales to domestic private buyers, a measure of consumer and business spending that measures core demand in an economy, eased to an annualized pace of 0.2% in the fourth quarter from 1.1% in the third quarter.
Recent surveys of purchasing managers in the US found that higher interest rates and persistent inflation weighed on demand in January in the manufacturing and services sectors. Parts of the economy also showed signs of cooling at the end of last year. retail fell last month At the sharpest pace in 2022, existing home sales in the United States have been declining eleventh month in a rowAnd Employment rates and wages have eased.
The course of the economy depends to a large extent on the performance of consumers in the coming months. There are signs that consumers are starting to falter. Shoppers curbed spending on home electronics, furniture and clothing after stocking up on these items earlier in the pandemic.
Still, Inflation is declining At the same time, wage growth remains strong in a tight labor market. These dynamics can help consumers’ ability and willingness to spend.
Federal Reserve officials are preparing to slow interest rate increases next week at their first meeting of the year and discuss how far to raise them after gaining more confidence that inflation will ease further this year.
The Fed initially hoped it could bring down inflation only with slowing economic growth rather than with outright deflation, an outcome it dubbed “Soft landing. “
“If we continue to have strong job growth and if we continue to get consumers spending on services and businesses don’t cut back on spending [capital expenditures]I think this adds fuel to the soft landing story, said Luke Tilley, chief economist at Wilmington Trust.
The broader economic losses from higher interest rates could take months to materialize, but one of the most interest rate-sensitive sectors – housing – is showing signs of pain due to High mortgage rates. Residential investment fell last year, while home sales fell nearly 18% in 2022 from a year earlier.
The Commerce Department said final sales to domestic private buyers, a measure of consumer and business spending that measures core demand in an economy, fell in the second and third quarters of 2022 from previous quarters.
Company co-owner Marc Colette said StoryBright Films, which provides filming and elopement planning services in the Blue Ridge Mountains, filmed 16 elopement couples last year, down from 20 in 2021.
Mr. Collett said his small business has received many inquiries and engaged in conversations with many potential clients in the past year. But more couples expressed concern about their finances and their ability to pay for a major event than the year before.
“We were going as far as sending them a contract to book, but then they got cold feet,” said Mr. Collett.
For 2022 marriages, he added, customers tended to book at the lower and upper ends of the price range, rather than the middle.
The purchasing power of salaries decreased Middle-income families Last year, while it rose in low- and high-income families. Many lower-income families benefited from pandemic wage increases and savings, while higher-income families had savings reserves large enough to spend aggressively.
Now, there are indications that the Americans They work with their savings. Households saved 2.4% of their disposable income in November, down from a peak of 33.8% in April 2020, as government stimulus left many consumers flush with cash but with few opportunities to spend during lockdowns.
Write to Sarah Chaney Cambon at [email protected]
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