Economic Growth | Weekly Excerpt January 30

In 2022 we saw two consecutive quarters of negative economic growth and it was to be feared that this would carry over into the following year. The technical definition of a recession is precisely what we just mentioned, but most economists will not usually admit that this happened. In large part because of a labor market that has remained strong.

In addition to that, the U.S. economy expanded by 2.9% on an annualized basis in the September-December period, according to the Commerce Department's preliminary GDP report. The Commerce Department also said the latest uptick in its GDP reading reflects an increase in consumer and government spending, as well as private inventory investment.  

These were offset by a decline in residential fixed investment, particularly in new single-family construction and broker commissions. Exports also fell, particularly in goods, reflecting a post-pandemic shift in spending patterns toward services such as travel and transportation. The GDP figure caps a year of declining economic activity marked by historic inflation. But the Fed has raised interest rates by more than 4 percentage points since March to cool prices, which many economists predict could weigh on demand and potentially trigger a U.S. recession later in 2023.

Inflation now appears to have peaked.

This leads many Fed watchers to predict that the central bank will unveil a less than quarter-point increase in borrowing costs at its monetary policy meeting next week.

In other reports Thursday, the number of Americans filing for unemployment insurance last week unexpectedly fell, suggesting persistent tightness in the U.S. labor market.