WASHINGTON ( Associated Press) – The US economy grew at an annual rate of 2.9% from October to December, a strong 2022 despite pressure from higher interest rates and widespread fears of a possible recession.
The Commerce Department reported on Thursday that gross domestic product, the broadest measure of economic output, slowed from 3.2% annual growth in the latest quarter from July to September. Most analysts expect the economy to slow further in the current quarter and enter at least a mild recession by mid-year.
The economy got a boost last quarter due to resilient consumer spending and businesses replenishing inventory. Federal government spending also helped increase GDP. But with higher mortgage rates hitting residential real estate, home investment fell at an annualized rate of 27% for the second straight quarter.
For all of 2022, GDP is projected to expand by 2.1%, following a 5.9% increase in 2021.
The expected slowdown is part of the Federal Reserve’s strategy to aggressively raise interest rates in the coming months. The rate hike is aimed at boosting growth, reducing spending and the worst inflation in four decades. Last year, the Fed raised the benchmark rate seven times. It is scheduled to do so again next week, although this time at a lower rank.
The flexibility of the labor market has been a big surprise. Last year, employers added 4.5 million jobs, more than the 6.7 million expected to be created in 2021, according to government data dating back to 1940. And last month’s unemployment rate was 3.5%, a 53-year low.
But the good times for the employees are not going to last long. Since higher rates make borrowing and spending more expensive in the economy, many consumers will spend less and employers are likely to hire less.
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Christopher Ragber contributed to this report.
