US Revises Down Last Quarter’s Economic Growth to 2.6% Rate

US Revises Down Final Quarter’s Financial Progress to 2.6% Charge

A building employee in Boston. (Michael Dwyer/AP)

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WASHINGTON — The U.S. economic system maintained its resilience from October by way of December regardless of rising rates of interest, rising at a 2.6% annual tempo, the federal government mentioned March 30 in a slight downgrade from its earlier estimate. However shopper spending, which drives many of the economic system’s development, was revised sharply down.

The federal government had beforehand estimated that the economic system expanded at a 2.7% annual charge final quarter.

The rise within the gross home product — the economic system’s whole output of products and companies — for the October-December quarter was down from the three.2% development charge from July by way of September. For all of 2022, the U.S. economic system expanded 2.1%, down considerably from a strong 5.9% in 2021.

The report advised that the economic system was dropping momentum on the finish of 2022.


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Shopper spending rose at a 1% annual charge final quarter, downgraded from a 1.4% enhance within the authorities’s earlier estimate. It was the weakest quarterly achieve in shopper spending since COVID-19 slammed the economic system within the spring of 2020. Spending on bodily items, like home equipment and furnishings, which had initially surged because the economic system rebounded from the pandemic recession, fell for a fourth straight quarter.

Greater than half of final quarter’s development got here from companies restocking their inventories, not a sign of underlying financial energy.

Most economists say they assume development is slowing sharply within the present January-March quarter, partially as a result of the Federal Reserve has steadily raised rates of interest in its drive to curb inflation.

The ensuing surge in borrowing prices has walloped the housing business and made it dearer for shoppers and companies to spend and put money into main purchases. As a consequence, the economic system is broadly anticipated to slip right into a recession later this 12 months.

The central financial institution has raised its benchmark rate of interest 9 instances over the previous 12 months. The Fed’s policymakers are betting that they will stick a so-called tender touchdown — slowing development simply sufficient to tame inflation with out tipping the world’s greatest economic system into recession.

But as increased mortgage prices unfold by way of the economic system, analysts are typically skeptical that the USA can keep away from a downturn. The principle level of debate is whether or not a recession will show gentle, with solely minor injury to hiring and development, or extreme, with waves of layoffs.

The monetary circumstances that led to the collapse of Silicon Valley Financial institution on March 10 and Signature Financial institution two days later — the second- and third-biggest financial institution failures in U.S. historical past — are additionally anticipated to sluggish the economic system. Banks are prone to impose stricter circumstances on loans, which assist gasoline financial development, to preserve money to satisfy withdrawals from jittery depositors.

“The economic system ended 2022 with marginally much less momentum,’’ Oren Klachkin and Ryan Candy of Oxford Economics wrote in a analysis be aware. “Trying forward, the economic system will face the complete brunt of tighter credit score circumstances and Fed coverage this 12 months, and inflation is about to remain above its historic pattern.”

They added: “We count on a recession to hit within the second half of 2023.’’

Within the meantime, the job market stays strong and has exerted upward strain on wages, which feed into inflation. The tempo of hiring remains to be wholesome, and the unemployment charge is close to a half-century low. The arrogance and spending of shoppers stay comparatively stable.

The March 30 report from the Commerce Division was its third and closing estimate of GDP for the fourth quarter of 2022. On April 27, the division will challenge its preliminary estimate of development within the present first quarter. Forecasters surveyed by the information agency FactSet have estimated that development within the January-March quarter is decelerating to a 1.4% annual charge.


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