US economic growth was worse than expected in the fourth quarter due to the downward revision in consumer spending. This result was not reflected in expectations but was expected.
2.7% Increase According to Departmental Data
The total value of all goods and services produced in the US increased at an annual rate of 2.7 percent in this period, the Commerce Department reported on Thursday. Previously, this rate was 2.9 percent.
According to the findings of the report, the economy will lose momentum until the end of 2022. Private domestic purchases, a key measure of core demand known as inflation-adjusted final sales excluding trade, government spending and inventories, rose just 0.1 percent. This is the lowest level since the pandemic began.
The Increase Was Above Expectations
In the last three months of 2022, household spending rose 1.4 percent from a year earlier, while spending on durable goods such as motor vehicles fell for the third consecutive quarter. Consumer spending was initially expected to increase by 2.1 percent.
The rapid decline in personal spending in particular had raised concerns about the state of the US consumer and expectations of a “soft landing” in the economy.
But the latest figures point to a very strong labor market, reflected in a surge in consumer spending in early 2023 and the lowest unemployment rate in 53 years.
Employment Remains Valuable For The Economy
Against a backdrop of tight labor supply, strong employment figures have raised labor costs for businesses and raised the risk of chronic high inflation. Although the Federal Reserve‘s aggressive rate hikes to combat inflationary pressures raise the possibility of a recession, strong employment growth is seen as the mainstay of the economy.
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