Jan 26, 2023 - Economy

U.S. economy expands at 2.9% annual rate in fourth quarter

Data: U.S. Department of Commerce; Chart: Axios Visuals
Data: U.S. Department of Commerce; Chart: Axios Visuals

The U.S. economy grew at an annualized 2.9% rate in the final months of 2022, the Commerce Department said on Thursday.

Why it matters: Economists are bracing for a significant slowdown in economic activity as the Federal Reserve's interest rates hikes take hold, but that certainly wasn't the case in the final months of last year.

  • Economists expected the Gross Domestic Product figures to show the economy grew at a 2.6% annualized rate last quarter, after expanding at a 3.2% pace in the prior quarter.

Details: Consumer spending and businesses built up private inventories gave GDP the biggest boost. Among the biggest drags: fixed investment, a category that includes housing.

By the numbers: Over the calendar year, GDP grew by 2.1% in 2022 — a decent pace, especially considering the historically aggressive rate hikes by the Federal Reserve that sought to restrain economic activity to contain inflation.

  • Those rate hikes hit the housing sector particularly hard, which dragged down overall growth earlier last year.

Catch up quick: The first half of 2022 was dogged by fears that the economy had entered a recession, after back-to-back quarters of contractions. But by the second half of the year, the economy had returned to growth mode.

  • The growth over 2022 was an expected slowdown from the 5.9% achieved in 2021, when the economy bounced back from the pandemic shock.

Editor's note: This story was updated with a new graphic.

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