The US economy expanded 2.9 percent during the last quarter of the year, Commerce Department data showed on Thursday. The resilient growth came despite predictions of recession for most of 2022, which roiled sentiment. For the whole of last year, the gross domestic product expanded 2.1 percent.
The fourth quarter growth numbers exceeded the expectations of analysts. According to economists surveyed by Bloomberg, the US economy was expected to grow at an annualized pace of 2.6 percent during the fourth quarter.
Stronger Than Expected
"The 2.9% annualized rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter went on ... We still expect the lagged impact of the surge in interest rates to push the economy into a mild recession in the first half of this year," Capital Economics senior economist Andrew Hunter wrote in a note, according to Yahoo Finance.
The surprisingly strong performance of the US economy, which is the bellwether for the global economy, happened despite the US central bank aggressively raising interest rates during 2022 in an effort to beat high inflation. The Federal Reserve hiked benchmark interest rates several times during the year, eventually adding 425 basis points from near-zero levels.
Several economists and market participants were alarmed over the brisk pace of the interest rate hikes, and had warned that the Fed was ushering in a recession. Though several sectors of the economy tended to slow down, the job market remained resilient and consumers continued to power the economy.
Worst is Not Over Yet
"The economy really outperformed here in the second half of the year ... Despite all the headwinds and the higher [interest] rates and all the things that went wrong, the economy was still able to grow in 2022," Mark Zandi, chief economist at Moody's Analytics, said, according to NPR."
However, some economists believe that the worst is not yet over for the economy. They expect a slowdown in 2023. Zandi said a recession is not ruled out later this year as the Fed is not showing no signs of going back to the war on inflation.
"The Federal Reserve is going to make sure of that ...They're raising interest rates aggressively in an effort to slow growth so that inflation comes back closer to their target. They're going to get what they want, one way or the other," he added.
Third Quarter Numbers
In the third quarter of 2022, the US economy expanded at an annual rate of 2.6 percent, marking the first quarterly growth in the year. Two straight quarters of negative growth had triggered fears that the world's biggest economy would slip into a recession. The Commerce Department data also showed that US exports remained robust thanks to a boost in industrial supplies and materials.
The US economy had declined as much as 1.6 percent and 0.6 percent in the first and second quarters of the year. Brokerages, investment banks and leading financial experts had warned that the US economy was on road to a recession, leaving a huge impact on the rest of the world.