Despite higher borrowing prices and an increase in the cost of living slowing growth, the US economy performed better than anticipated at the end of the previous year.
According to official data, the economy expanded at an annual rate of 2.9% in the final quarter of 2022.
Due to a decline in home sales and building, that figure fell from 3.2% in the previous quarter.
Despite the fact that the job market has held up, some analysts are concerned that the US economy is about to enter a recession.
Although the unemployment rate is close to historic lows, the economy as a whole has been deteriorating.
Retail sales in December, which is typically a big month for consumer spending, fell 1.1% from the previous month.
In addition, manufacturing has suffered while the stock market experienced a last year.
According to the report released on Thursday, decreases in the building of new homes caused housing investment, which is sensitive to interest rates, to decline at an annual rate of almost 27% in the three months leading up to December.
The US economy’s main engine, consumer spending, nevertheless kept going strong despite slowing down.
The economy expanded by 2.1% for the entire year. This was less than the previous year, when the economy roared back to life following the pandemic, growing at the fastest rate since 1984, 5.9%.
The US central bank intervened to try to stabilize prices as a result of that surge, which also contributed to a sharp rise in prices.
The Federal Reserve raised interest rates last year, taking them from almost zero to more than 4%, the highest level in 15 years.
In an effort to relieve the pressures driving up prices, the bank is encouraging consumers to save more money and spend less by raising borrowing costs. However, it runs the risk of starting a major downturn that might result in millions of people losing their jobs.
The number of job loss reports has increased. Among the major companies that announced significant layoffs this week were manufacturing giant 3M, chemicals giant Dow, and computing giants IBM and SAP. Others, though, like the restaurant business Chipotle, are hiring more people.
Officials from the Fed have expressed their continued optimism that the economy can shift without suffering significant job losses, allowing their campaign to raise rates to end in a supposedly “soft landing” instead.
“The Federal Reserve has been attempting to accomplish a soft landing for almost a year by raising short-term interest rates just enough to reduce inflation without sparking a recession. Despite the Fed’s efforts, it is evident that the economy is still relatively strong, indicating that they are successful “the managing director of Charles Schwab UK, Richard Flynn.
Investors, however, could worry that today’s numbers are somewhat misleading because recent data has been pointing to a recession.