The US economy expanded again during the fourth quarter, registering solid growth to end 2022 even as consumers and businesses battled inflation and historically high interest rates.
Gross domestic product — the broadest measure of economic activity — increased at an annualized rate of 2.9% from October to December last year, according to Commerce Department data released Thursday. For 2022, GDP expanded 2.1%, the report showed.
Last quarter’s 2.9% expansion, while a step back from the 3.2% annualized growth seen in the third quarter, represents continued improvement on the first half of the year when GDP shrank. Those two back-to-back quarters of contraction set off alarm bells, since the declines marked a symbolic threshold for a rule-of-thumb, but unofficial, definition of a recession.
However, 2022 was a year of transition as the economy continued to recover from the pandemic. Imbalances in trade and inventories had an outsized effect on the GDP data in the earlier parts of the year.
But businesses have since readjusted to snarls in the supply chain, and consumers have shifted their spending away from furniture, bikes and other goods and toward services like travel and dining out.
The robust economic growth registered during the fourth quarter was mostly fueled by a “shockingly resilient consumer,” said John Leer, chief economist of Morning Consult.
However, there are signs that’s starting to wane, he said.
“Consumers are increasingly struggling to navigate the ongoing effects from the spike in prices last year by drawing on credit and savings,” he said. “With consumer demand likely to continue its downward trajectory, business investment is also likely to slow in the coming quarters, increasing the probability of a recession this year.”
Economists were expecting fourth-quarter GDP to grow at an annualized adjusted rate of 2.6%, according to Refinitiv.
Thursday’s GDP figures are the first of three official estimates to be released by the Commerce Department for the fourth quarter. GDP data is often revised, sometimes years later.
This story is developing and will be updated.