The American economy grew at a 2.9% annualized rate in the fourth quarter of 2022, slightly surpassing expectations even as recessionary concerns loom.
Real gross domestic product, the sum of all final goods and services produced in the economy adjusted for inflation, expanded at a slower pace than the 3.2% annualized rate seen in the third quarter of 2022, according to an advance estimate from the Commerce Department’s Bureau of Economic Analysis. The nation formerly met the technical definition of a recession, two consecutive quarters of negative growth, as the economy shrank at a 1.6% pace in the first quarter of 2022 and a 0.6% pace in the second quarter of 2022.
The growth was attributable to a rise in private inventory investment, consumer spending, and government spending. Exports and imports both decreased; the former is an addition to GDP calculations, while the latter is a subtraction.
Growth in private inventory investment resulted from higher manufacturing, mining, utilities, and construction industries. Residential fixed investment also decreased due to lesser activity in new single-family home construction, a phenomenon that occurred while mortgage rates soared as a result of monetary policy actions from the Federal Reserve.
The annualized growth of 2.9% exceeded analysts’ expectations of 2.8% even as recession fears linger. Most analysts believe this year will see a recession as inflationary pressures and supply chain woes persist. An economic contraction would follow one of the worst stock market performances in modern history last year.
Bank of America Chief Investment Strategist Michael Hartnett said in a report that a recession would occur in the first half of the year before markets attain a “much more solid footing.” On the other hand, an outlook from Goldman Sachs Chief Economist Jan Hatzius noted analysts at the company believe “there are strong reasons to expect positive growth in coming quarters.”
Critics have accused the Biden administration of worsening economic bottlenecks. The commander-in-chief nixed expansions to the Keystone XL Pipeline upon his entrance into office and has leased less federal land for oil drilling than any of his predecessors since World War II. Public records also show that the administration’s task force on the supply chain crisis produced little to no results as Agriculture Secretary Tom Vilsack never attended meetings and Transportation Secretary Pete Buttigieg took a two-month paternity leave.
White House Press Secretary Karine Jean-Pierre said last week that Biden “inherited an economic crisis and turned it into the strongest two years of job growth on record,” even as prominent technology companies announced mass layoffs. She repeatedly dismissed concerns that the cuts could indicate higher unemployment across the economy. “We’re seeing the President’s economic policy actually working. And I think that’s important as well,” she said. “Is there more work to do? Always more work to do, and you hear that from us as well.”
Price levels have moderated in some areas as year-over-year inflation decreased from 7.1% in November to 6.5% in December. Treasury Secretary Janet Yellen nevertheless remarked that inflation “has really been quite moderate, quite low for the last six months or so,” even as price increases remain well above the 2% annual rate seen before the lockdown-induced recession.