The US economy grew at a 2.7% annual rate in the final three months of the year, the Commerce Department reported Thursday. That\u2019s less than the previous estimate of 2.9% growth in the quarter.
\nThe slower increase in gross domestic product, a broad measure of economic activity, could be a sign that the Federal Reserve\u2019s series of steep interest rate hikes are having more of an impact than previously thought.
\nOther recent economic readings, including the very strong January jobs report and a strong rebound in retail sales, suggest the Fed could do more to try to beat back inflation through higher interest rates meant to slow the economy.
\nThe Fed\u2019s most recent rate hike earlier this month was only a quarter of a percentage point, the smallest increase in its benchmark rate in nearly a year.
\nWhile the slower pace of overall growth might seem like good news for those who think the Fed should continue to go slow on future rate hikes, the report also had some bad news on the inflation front.
\nThe index that measures prices paid for personal spending, known as the PCE Price Index, rose 3.7% in the quarter, which is up from the 3.2% reading in the preliminary report. The so-called PCE deflator, another closely watched inflation measure of consumer spending in the report, was up to 3.9% from 3.5% previously.
\n\u201cThe biggest news [in the GDP report] was on inflation, which continues to run much hotter than the Fed would like,\u201d said PNC Chief Economist Gus Faucher. \u201cThe upward revisions to fourth quarter inflation support further increases in the fed funds rate in the near term. This, in turn, means further drag on the economy from higher rates in the second half of 2023.\u201d
\nPNC says the Fed\u2019s significant increases in interest rates since earlier last year could lead to a recession later in 2023.
\n\u201cThe recession should be mild, however, given the current strength of the labor market, strong consumer balance sheets, and a well-balanced housing market,\u201d said Faucher.
\nFaucher said the slightly lower reading for overall GDP compared to the initial estimate of a month ago was due to downward revisions to consumer spending and exports.
\nStill, both the PCE Price Index and the deflator are well off previous quarters\u2019 pace of price increases. The PCE Price Index hit a high of 7.5% in the first quarter of last year, while the PCE deflator hit 9% in the second quarter. After the Fed got aggressive with interest rate hikes in that quarter, the drop in inflation readings shows the Fed is having some impact.
\nJobs remain strong
\nAlso Thursday: First-time claims for unemployment insurance ticked down to 192,000 for the week ended February 18, according to data released by the Department of Labor.
\nThat\u2019s down 3,000 from the prior week\u2019s upwardly revised total of 195,000.
\nEconomists were expecting 200,000 initial unemployment applications, according to consensus estimates on Refinitiv.
\nContinuing claims, which are filed by people who have received unemployment benefits for more than one week, dropped to 1.654 million for the week ended February 11, from 1.696 million the week before. Economists were expecting 1.7 million.
\nDespite a slew of layoffs in some sectors like tech, media and the mortgage industry, the US labor market remains robust, with almost two jobs available per job seeker as companies remain reluctant to let go of workers.
\n\u201cAlthough company layoff reports are becoming more common, those layoffs are not yet showing up in the unemployment insurance data,\u201d Stuart Hoffman, PNC senior economist, wrote Thursday. \u201cSome of this may be timing: If the company offers severance, the claims are not counted until the severance expires. But even so, the job market remains remarkably strong.\u201d
\nHowever, layoffs remain low across the broader economy and job growth remains strong.
\nIn January, the US economy added 517,000 jobs \u2014 employment growth that far exceeded economists\u2019 expectations for a slowdown \u2014 and the unemployment rate fell to 3.4%, which is a level not seen since May 1969.
\nThe tight labor market will keep the Fed on the path of raising rates at its March meeting, Nancy Vanden Houten, lead US economist for Oxford Economics said in a statement.
\n\u201cWe expect jobless claims to trend higher as the economy slows in response and eventually enters a mild recession later this year,\u201d she wrote. \u201cBut the rise may be muted compared to prior recessions as employers will be reluctant to lay off workers that have been difficult to find in the first place.\u201d
\nThe jobless claims is one of the most real-time economic readings released by the government, while the GDP report, especially this month\u2019s revision and next month\u2019s final estimate of fourth quarter growth, are among the least current readings watched closely by economists and investors.<\/p>\n
edition<\/p>\n
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The US economy grew at a 2.7% annual rate in the final three months of the year, the Commerce Department reported Thursday. That\u2019s less than the previous estimate of 2.9% growth in the quarter. The slower increase in gross domestic product, a broad measure of economic activity, could be a sign that the Federal Reserve\u2019s series of steep […]<\/p>\n","protected":false},"author":5,"featured_media":6367,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1154],"tags":[2074,2590],"class_list":["post-6366","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trending","tag-economy","tag-grew"],"_links":{"self":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/6366","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6366"}],"version-history":[{"count":1,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/6366\/revisions"}],"predecessor-version":[{"id":6368,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/6366\/revisions\/6368"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/media\/6367"}],"wp:attachment":[{"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}