US Economy Shows Slowdown Signs After Growing 2.9% Last Quarter

The US economy grew faster than forecast into the end of 2022, but there were signs of slowing underlying demand as the steepest interest-rate hikes in decades threaten growth this year.

Gross domestic product increased at a 2.9% annualized rate in final three months of 2022 after a 3.2% gain in the third quarter, the Commerce Department’s initial estimate showed Thursday. About half of the GDP increase reflected inventory growth, while government outlays matched the biggest gain since early 2021.

Personal consumption, the biggest part of the economy, climbed at a below-forecast 2.1% pace.

The mixed report suggests that the Federal Reserve still has a path to a soft landing with officials set to further downshift their rate increases next week and debate when to pause. Their preferred price gauge rose at the slowest pace in two years, while a separate report showed unemployment filings remained near historic lows.

The data showed some signs of stress for American consumers whose wages have failed to keep up with inflation and continued to encourage them to draw down savings accumulated from government pandemic-relief programs. The burden of elevated prices and higher borrowing costs is mounting, pointing to a tenuous outlook for the economy.

“When we look at what’s happening with the consumer, which is the backbone of the US economy, we are seeing a clear loss of momentum,” Lindsey Piegza, chief economist at Stifel Nicolaus & Co., said on Bloomberg Television.