WASHINGTON (AP) — The U.S. economic system expanded at a 2.7% annual charge from October by way of December, a strong exhibiting regardless of rising rates of interest and elevated inflation, the federal government stated Thursday in a downgrade from its preliminary estimate.
The federal government had beforehand estimated that the economic system grew at a 2.9% annual charge final quarter.
The Commerce Division’s revised estimate of final quarter’s gross home product — the economic system’s whole output of products and companies — marked a deceleration from the three.2% development charge from July by way of September. Whereas total development was strong within the fourth quarter, enterprise spending barely rose, and shoppers spent cautiously, suggesting that the economic system misplaced momentum on the finish of 2022.
Newer information issued this month, although, exhibits that the economic system has since rebounded. Shoppers boosted retail gross sales in January by essentially the most in practically two years, and employers added a surprisingly outsize variety of jobs. The unemployment charge reached 3.4%, the bottom stage since 1969.
Among the surprisingly robust financial features in January seemingly mirrored a lot warmer-than-usual climate. Few economists anticipate comparable outsize features in hiring or spending within the coming months. Most analysts assume development is slowing to a roughly 2% annual charge within the present January-March quarter.
And the Federal Reserve is anticipated to maintain elevating its benchmark rate of interest over the subsequent few months and to maintain it at a peak by way of 12 months’s finish to attempt to defeat still-high inflation.
Greater borrowing prices make mortgages, auto loans and bank card borrowing dearer. These greater charges might discourage shoppers and companies from spending, hiring and investing and will finally push the economic system right into a recession.
Inflation, measured 12 months over 12 months, has cooled because it reached 9.1% in June, having slowed to six.4% in January. But on a month-to-month foundation, value features accelerated from December to January, elevating the prospect that the Fed will elevate its benchmark charge greater than it has beforehand signaled.