GDP Comes in Better Than Expected, But lower than Q3
Fourth-quarter GDP increases at 2.9% rate
Consumer spending solid; business investment weakens
Weekly jobless claims fall 6,000 to 186,000
Real GDP grew at an annualized rate of 2.9% in the fourth quarter relative to Q3-2022. The outturn was a bit stronger than the consensus expectation, and it represents the second consecutive quarter of above-trend GDP growth. That noted the underlying spending components were not quite as impressive. Moreover, monthly data indicate that while the economy came into the fourth quarter with solid momentum, it ended the quarter with a distinct loss of momentum. Growth likely will be weak, at least relative to the last two quarters of 2022, in Q1-2023.
Growth, but underlying details not as impressive
This morning, data released showed that the United States’ real GDP grew at an annualized rate of 2.9% in the final quarter of 2022 compared to the previous quarter. This result was stronger than the consensus expectation of 2.6% growth and represents a slight decrease from the 3.2% growth rate recorded in the third quarter. In comparison, the U.S. economy’s average growth rate during the 2010-2019 economic expansion was 2.3% per year. Therefore, the economy grew at a faster rate in the latter half of last year. However, a closer look at the data shows that Q4 GDP was actually negative when you strip Transportation. Furthermore, when looking at the number as a whole is the drawdown in both consumer, and corporate spending. With a larger portion going to Transportation and Services.
The Labor Department reported on today that the number of Americans filing for unemployment benefits fell by 6,000 last week to 186,000. This marks the first time in nine months that the number has been below 200,000 in back-to-back weeks. The four-week moving average of claims also decreased by 9,250 to 197,500, which is the first time it has been below 200,000 since May of last year. Despite the Federal Reserve’s efforts to cool the economy and curb inflation by raising interest rates, the labor market remains tight.
Though the U.S. labor market remains robust, layoffs have been mounting in the technology sector, which is dealing with falling demand as inflation squeezes both businesses and families.
German software company SAP announced Thursday that it was cutting up to 3,000 jobs worldwide, or about 2.5% of its workforce, after a sharp drop in profits.
IBM announced late Wednesday that it was slashing 3,900 positions. Microsoft announced last week that it is cutting 10,000 workers, almost 5% of its workforce, joining other tech companies that have scaled back their pandemic-era expansions. That followed job cuts previously announced by Amazon, Salesforce, Facebook parent Meta, Twitter and DoorDash.