2.9% pace was still lower than the third quarter, and recession fears still abound
The latest report from the U.S. Department of Commerce shows that fourth quarter GDP growth rose at an annualized rate of 2.9%, slightly above economist expectations of 2.8%. This rate is slower than the 3.2% pace in the third quarter.
Consumer spending, which makes up around 68% of GDP, increased by 2.1% for the period, down slightly from 2.3% in the previous quarter. The inflation rate also dropped at the end of 2022, after hitting 41-year highs in the summer. The personal consumption expenditures price index increased 3.2%, in line with expectations but down sharply from 4.8% in the third quarter.
Despite the GDP growth, some experts are still concerned the economy may be heading toward a recession, noting that the economy lost momentum in the fourth quarter. Weekly jobless claims point to a strong, but tight, labor market, with weekly claims dropping to the lowest level since April of last year.
However, even though the year started off with GDP hitting negative numbers for the first two quarters, it turned positive for the final two thanks to a strong labor market and resilient consumer spending. But retail sales were down 1.1% in December, signaling a possible slow-down in spending, while the housing market also continues to struggle in part due to high interest rates, with new housing starts down 22% compared to this time last year.