The U.S. economy powered through high inflation, rising interest rates and an energy shock to grow at a solid pace over the course of 2022, according to data released Thursday by the Commerce Department.
U.S. gross domestic product (GDP) grew 2.1 percent last year and at an annualized rate of 2.9 percent during the fourth quarter. That means the U.S. economy would have grown by nearly 3 percent if the pace of growth in the fourth quarter lasted an entire year.
Economists had been expecting between 2.6 and 2.8 percent annualized growth in the fourth quarter, so the figures came in ahead of expectations. They’re a modest fall-off from the 3.2-percent growth rate in the third quarter.
“The increase in real GDP in 2022 primarily reflected increases in consumer spending, exports, private inventory investment, and nonresidential fixed investment,” the Commerce Department’s Bureau of Economic Analysis (BEA) wrote in its news release on Thursday.
Personal consumption grew by 2.1 percent in the fourth quarter and has remained at or above 2 percent since the second quarter of 2022. Private inventories were also a major contributor to GDP growth, up 1.46 percent in the fourth quarter.
Notably, inflation-adjusted personal incomes increased 3.3 percent in the fourth quarter, compared to an increase of 1 percent in the third quarter, adding some heft to consumers’ pocketbooks.
“The increase primarily reflected increases in compensation (led by private wages and salaries), government social benefits, and personal interest income,” the BEA wrote.
GDP fell in the first two quarters of 2022, leading many Americans to believe a recession had already started last year. But strong growth in the second half of the year bucked that trend, leaving GDP basically in line with where it should have been prior to the pandemic, according to a forecast from the Congressional Budget Office.
“The latest GDP data shows that the economy continued to expand in the 4th quarter, which is consistent with most of the measures the NBER [National Bureau of Economic Research] uses to define recessions. Despite some slight dips in GDP in the first half of the year, this latest data suggests that the U.S. likely made it through 2022 without entering a recession,” Jeremy Horpedahl, an economist at the University of Central Arkansas, said in an email to The Hill.
The solid numbers are a reflection of a consistently tight labor market that’s allowed U.S. consumers to continue spending even as many commercial economists have been warning of a recession.
After rising slightly last fall, the unemployment rate in December dipped back down to 3.5 percent. The last time it was lower than 3.5 percent was in 1969.
The GDP numbers also come amid rapidly falling inflation, which has dropped for six straight months to 6.5 percent annually in December off a high of 9.1 percent last June, effectively boosting the purchasing power of U.S. consumers. This has bolstered hopes for a “soft landing” from the Federal Reserve – lower inflation without a serious, job-killing recession.
“Many economists have gone way overboard in talking as if a 2023 recession is all but inevitable. I would put the odds of a recession this year at something like 35 percent,” Jeffrey Frankel, an economist at the Harvard Kennedy School and a former member of the committee at the National Bureau of Economic Research that officially designates recessions, said in an email to The Hill.
This story was updated at 10:17 a.m.
Sylvan Lane contributed to this developing report