This could be the last quarter of solid growth before the delayed effects of the cycle of Federal Reserve monetary policy tighteningthe fastest since the 1980s. Most economists expect a recession for the second half of the yearalbeit slight compared to previous recessions.
Retail sales have weakened sharply in the past two months and the manufacturing sector seems to have joined a housing market in recession. Although the job market remains strongbusiness confidence continues to deteriorate, which could end up hurting hiring.
The solid growth in the second half erased the contraction of 1.1% in the first six months of the year. in the set of 2022, the economy expanded by 2.1%, below the 5.9% registered in 2021.
Last year, the Fed raised its official interest rate by 425 basis points, since near zero up to a range between 4.25% and 4.50%the highest since late 2007.
The consumer Spending, which represents more than two thirds of the activity American economy, was the main engine of growth mainly reflecting a rebound in spending on goods at the beginning of the quarter. The spending has been supported by the labor market resistanceas well as the excess savings accumulated during the COVID-19 pandemic.
Nevertheless, the demand for durable manufactured goods, which are mostly bought on credit, has faded and some households, especially lower-income ones, have depleted their savings. Business spending also lost some luster at the end of the fourth quarter.
Will there be a recession in 2023?
Despite the clear signs of weakness that are looming for 2023, some economists are cautiously optimistic that the economy will avoid a recession in full rule and suffers rather a progressive slowdown, in which the sectors decrease in turns and not all at the same time.
According to a survey on business conditions, the probability that USA this in recession or fall this year has fallen in the last three months to 56% from a chance of almost two-thirds.
They argue that monetary policy now acts with less delay than beforedue to technological advances and the transparency of the US central bank, which, according to them, makes financial markets and the real economy act in anticipation of rate hikes.
The residential investment suffered its seventh consecutive quarterly declinethe longest streak since the collapse of the housing bubble triggered the Great Recession, but there are signs that the housing market may be stabilizing.
The mortgage rates they have trended lower as the Fed slows the rate of hikes.
A separate report from the Department of Labor showed Thursday that Initial claims for state unemployment benefits fell by 6,000to a seasonally adjusted figure of 186,000, for the week ending January 21.
The number of people receiving benefits after an initial week of help, a rough indicator of recruitment, increased by 20,000, to 1.675 million in the week ending January 14.
Companies outside the technology industry, as well as interest rate-sensitive sectors such as real estate and finance, are hoarding workers after struggling to find labor during the pandemic.
Source: Ambito
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