US economy grew by 2.9% in Q4 2022

The US economy expanded again during the fourth quarter, registering growth to end 2022 even as consumers and businesses battled inflation and historically high interest rates. Gross domestic product (GDP) – the broadest measure of economic activity – increased at an annualized rate of 2.9% from October to December last year, according to Commerce Department data released Thursday. For 2022, GDP expanded 2.1%, the report showed.

The 2.9% expansion in the fourth quarter of 2022 was driven by a combination of factors, including a surge in consumer spending and an increase in business investments. Consumer spending, which accounts for more than two-thirds of the economy, increased at a robust 4.3% annualized rate in the fourth quarter. This was a significant improvement from the 3.4% growth seen in the previous quarter.

Business investments also played a major role in the GDP growth, with nonresidential fixed investments increasing at an annualized rate of 8.4%. This was driven by investments in equipment, structures, and intellectual property products. Additionally, there was also a significant increase in the exports of goods and services, which added 0.9 percentage points to the GDP growth.

Despite the positive growth, the US economy is still facing several challenges. Inflation remained elevated throughout 2022, with the Consumer Price Index (CPI) increasing by 2.6% for the year. This was driven by rising prices for food, housing, and transportation. Additionally, interest rates also remained historically high, with the Federal Reserve’s benchmark rate at 2.25%. This made it more expensive for businesses and consumers to borrow money, which could potentially slow down economic growth in the future.