In the fourth quarter of 2022, the US economy showed solid growth with a gross domestic product (GDP) increase of 2.9%, slightly surpassing market expectations. However, there are concerns about whether this positive growth will continue in the year ahead. Consumer spending, which accounts for a significant portion of GDP, weakened slightly from the previous period but remained positive at 2.1%. Government spending and private investment contributed to the growth, while a decline in housing activity pulled down the GDP. Jobless claims also fell, and durable goods orders increased, driven mainly by demand for aircraft.
While the growth rate in the fourth quarter was slightly slower than the previous quarter, it still represents a strong performance for the US economy. However, there are concerns about the potential for negative growth in the coming year. The economy experienced negative growth in the first two quarters of 2022, meeting the technical definition of a recession, but rebounded in the second half of the year. The resilience of consumer spending and a strong labor market provided hope for the economy’s performance in 2023. However, economists caution that the economy may face a more pronounced slowdown in the near future.
Despite the positive economic data, many economists believe that a recession is likely in 2023. The Federal Reserve’s aggressive interest rate increases to combat inflation are expected to have an impact this year. Rate hikes typically have a lagged effect, meaning their full impact may not be felt immediately. Some sectors, such as housing, have already shown signs of a recession, with declines in building permits and starts. Corporate profit reports from the fourth quarter also indicate a potential earnings recession. Additionally, consumer spending is showing signs of weakening, with a decline in retail sales in December. Overall, while the US economy finished 2022 in a solid position, there are concerns about its future growth trajectory.
