GDP Report Shows Economic Growth Cooled Slightly in Fourth Quarter - WSJ
S E E D E D C O N T E N T
U.S. economic growth cooled to a 2.9% annual rate in the fourth quarter, capping a year of high inflation and rising interest rates.
U.S. gross domestic product growth at the end of the year was down slightly from a 3.2% annual rate in the third quarter, the Commerce Department said Thursday. The three months from October to December capped a year of economic cool-down from a rapid pandemic rebound that fueled red-hot growth in 2021.
Economic output grew 1% in the fourth quarter of 2022 compared with a year earlier, the Commerce Department said. That compares with 5.7% growth in 2021 and 2.6% growth in 2019 ahead of the pandemic.
At least some of the 2022 slowdown reflected a return to a more normal pace of growth after output surged amid pandemic reopenings, fiscal stimulus and a waning pandemic the year before.
Consumers, the economy’s main engine, spent at a solid pace of 2.1% in the final three months of last year. Business investment and government spending also contributed to growth last quarter.
Despite signs of resilience, many economists are concerned about the possibility of a U.S. recession this year. They expect the Federal Reserve’s efforts to curb high inflation through rapid interest-rate increases will trigger broad spending cutbacks and job losses.
“Headwinds from the big jump in interest rates, consumers cutting back on discretionary spending and weak economies overseas were big problems for the U.S. in late 2022,” said Bill Adams, chief economist for Comerica Bank. “I expect real GDP growth will likely turn negative in the first half of this year.”
Recent surveys of U.S. purchasing managers found that higher interest rates and persistent inflation weighed on demand in January in the manufacturing and service sectors. Parts of the economy also showed signs of cooling at the end of last year. Retail sales fell last month at the sharpest pace of 2022, existing-home sales fell for the 11th straight month , and hiring and wage growth eased .
The trajectory of the economy largely depends on how consumers fare in the coming months. There are signs consumers are starting to stumble. Shoppers have reined in spending on home electronics, furniture and clothing after stocking up on those goods earlier in the pandemic.
Still, inflation is coming down from historic highs at the same time wage growth remains strong in a tight labor market. Those dynamics could help consumers’ ability and willingness to spend.
Fed officials are preparing to slow interest-rate increases next week at their first meeting of the year and debate how much higher to raise them after gaining more confidence inflation will ease further this year.
The Fed had initially hoped it could bring down inflation with only a slowing in economic growth rather than an outright contraction, an outcome dubbed a “ soft landing .”
“If we continue to get strong job growth and if we continue to get consumer spending on services, and companies don’t cut back on [capital expenditures], I think that adds fuel to the soft-landing story,” said Luke Tilley, chief economist at Wilmington Trust.
The broader economic toll from rising rates can take months to materialize, but one of the most interest-rate-sensitive sectors—housing—is showing signs of pain due to rising mortgage rates . Residential investment declined last year, while home sales fell almost 18% in 2022 from the previous year.
Final sales to private domestic purchasers, a measure of consumer and business spending that gauges underlying demand in the economy, cooled in the second and third quarters of 2022 from previous quarters, the Commerce Department said.
StoryBright Films, which provides photography and planning services for elopements in the Blue Ridge Mountains, photographed 16 couples’ elopements last year, down from 20 in 2021, said Mark Collett, the company’s co-owner.
Mr. Collett said his small business received many inquiries and engaged in conversations with a lot of potential clients last year. But more couples expressed concern about their financial situations and ability to pay for a big event than a year earlier.
“We would even get as far as sending them a contract to book, but then they got cold feet,” Mr. Collett said.
For 2022 marriages, clients tended to book at the bottom and top ends of the price range, rather than the middle, he added.
Purchasing power from paychecks fell for middle-income households last year, while it rose for lower-income and higher-income households. Many lower-income households benefited from wage increases and pandemic savings, while higher-income households had a large enough savings buffer to spend aggressively.
Now, there are signs that Americans are working through their savings . Households saved 2.4% of their disposable income in November, down from a peak of 33.8% in April 2020 as government stimulus left many consumers flush with cash but with few opportunities to spend during lockdowns.
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Demand has slowed down.
I work in transportation.
When Kellogg and Seneca start slowing down on shipping from their plants; and have stopped receiving goods from their suppliers- it is getting bad. That is food; which means people are really cutting back on basic necessities.
When people are having to decide between eggs, Cheerios, and Pop Tarts- all of which are now over priced due to inflation and other factors- it is bad.
And thus, businesses are belt-tightening.
On the international side, 40' container rates from China to LA/LB have gone from $13,000 to $2,100.
I will give Brandon part of the credit for that- and not even in a negative way. He helped increase the capacity of LA ports to load outbound vessels back to China. Sure most of the outbounds are filled with empty 40ft containers; but it has alleviated the congestion at the LA ports and has given China the empty equipment it needs to load product (now they have too many empties on the Chinese side- but I am sure that will change given enough time).
Part is an affect of Chinese production having slowed due to another round of Covid. Great for transportation costs. Also a sign of the US not ordering as much product from China due to lower demand here.
We will see where things are at in a couple of months now that China is easing Covid restrictions (with both the good and bad it will bring).
Thankfully the US doesn't rely on China for food.
Rates from all the base ports and secondary ports have fallen dramatically.
It's simple supply and demand.
If one wants to help the inflationary aspect drop the tariffs that were imposed during Trump administration held by the Biden administration. Numerous US businesses, both large and small have requested they be dropped.
Also, again a sign that demand in the US has fallen. Part of the problem with being a world economy.
Drop the tariffs on China?
I don't agree with that. I don't care who requests it.
From what I have seen Brandon has ended the US tariffs on Europe. Didn't get NATO members to agree to increase NATO funding. US is doing all the heavy lifting in Ukraine. The Europe tail is wagging the US dog again- so things are back to normal there.
As for other countries we have tariffs on who do you suggest ending them with?
The tariffs only hurt the US buyers/importers
I never said they were, we trade with other countries and always have that is not our friend.
Two issues here. First China has to take Taiwan and they are seeing how a determined country that is smaller and does not have the firepower is showing Russia to be somewhat of a paper tiger. The Chinese are also seeing how western weapons are far superior to Russian arms.
Second. There are a number of chip factories being built in the US. The world's largest producer of advanced chips, TSMC is building a huge plant in Phoenix, AZ. That along with other chip plants under construction and in the planning stage will leave China in a poor position. If China actually tries to invade and take Taiwan the Taiwanese will destroy the plants there and China will be left with nothing.
Not so, most all the NATO countries have increased their defense budget and are supplying billions of dollars of aid, both humanitarian and military to Ukraine the US, as the world's largest economy is giving massive amounts of aid but if you take the % of GDP we are not the top supporter. Additionally, the orders for US weapons systems from NATO and non-NATO countries is growing.
There was another very large aid package in January 2023 that does not show in these stats.
I mentioned only the new tariffs that the Trump administration instituted and the Biden administration has mostly held in place. It would seem that tariffs that hurt (cost) the US buyers should be reviewed and if necessary dropped.
I know all about that from when Brandon was begging the Saudis for oil. We sell weapons to the Saudis. We defended the Saudi oil fields and pipelines when Yemen attacked them. Yet the Saudis told Brandon to pound sand since he reprimanded them on the torture and murder of Jamal Khashoggi. Seems that many Democrats wanted to cut the Saudis off completely; and some neocons were even talking about invasion to take the oil by force.
Which is why the US needs to produce what we need. We have the resources to do so; but shoot ourselves in the foot at every turn. So we end up negotiating with countries we should never deal with.
China isn't nearly as militarily incompetent as Russia; who is still fighting like it is WWI. Or at least they haven't proven themselves to be yet.
Taiwan (13,976 square miles) isn't nearly as big and hard to swallow in one bite as Ukraine (233,090 square miles).
As for the problems with Russian military hardware as compared to western arms. Don't look now but China is set to become the #2 arms exporter in the world. They aren't buying nearly as much from Russia. In fact with the war in Ukraine they are exporting military equipment, arms, and munitions to Russia.
China also knows the value of having an advanced well equipped air force.
If China attacks Taiwan no way the US gets there in time to help before the invasion is complete. The US is 7,619 miles away by air. That is logistically impossible to overcome; unless China tips it's hand like Russia did.
The US fighting China on what amounts to their home turf wouldn't be easy. China has the assets right there; while we would have to find a base of operation in the area. Japan and South Korea would be best (still not ideal); but reinvading Taiwan would be costly in terms of US military lives lost.
Our best option is hoping that China doesn't want a conflict with the US; and would rather drown us long term economically.
As for the semi and superconductor chip factories in Taiwan. China already is operating both politically and covertly in Taiwan. Don't think Xi is dumb enough to attack unless there is a plan in place to secure the chip factories intact. The plants in the US are still years away from producing their first chip; and where will the US procure the materials needed to make the chips? Maybe Xi will be nice enough to wait for the plants to be built and the US secure the raw materials abroad it needs before invading.
If you are going to use the childish term ''Brandon'' don't bother to respond to me and I don't see any point in trying to respond to you.
Grow up.
In other words, by cutting our deficit by a trillion dollars in 2022 alone and raising interest rates we have cut inflation and excess demand thus securing a soft economic landing while avoiding a recession. Today we remain at full employment as wages continue to rise. A 2.6% growth is good, butt leave it to the far rightwing WSJ to spin all this good news into a disaster...
Meanwhile the gop in Congress wants to impose a 22% sales tax on us!
No they didn't. Right now it's in committee. SMH
So, no qualms about the rest of what I said?
Source considered...............so no.
Only about 20 Republicans in the House asked for this bill to go to committee where it will most likely die. All Democrats and a majority of Republicans would vote no if it reached the floor.
how did the deficit
reduction lower inflation?
A couple of issues with this:
1: I could not find any "spinning", after reading several of her articles the author appears to be a straight shooter.
2: Although the WSL editorial board is conservative and at times to a fault they are as far from being extremists as are the liberal editorial board of the NYT.
3: Reporting on the WSJ is considered to be in the center, editorial content to the right but not so much as to be in the ditch.
That said, calling the WSJ "far rightwing" can be seen as a response to the seeder naming everything he(?) disagrees with as "far leftwing".
Meh, pretty damn good for an advanced nation. I'll take it.