Employees work on the assembly line at the Dakkota Integrated Systems manufacturing facility in Detroit on May 5, 2022.
Consumer spending – which accounts for about two-thirds of GDP – remained solid in the fourth quarter: It rose 2.1% for the period, a slight drop from the previous pace of 2.3%. Increases in private inventory investments, a boost in federal government spending and a jump in non-residential fixed income also helped to boost the GDP numbers. However, high mortgage rates continued to drain demand from the real estate market, with investment in housing plunging 27% for a second straight quarter.
Despite the surprising show of resilience, there are growing signs the economy is beginning to slow. Job growth is moderating; the housing market – which is vulnerable to higher interest rates – entered a recession last year; and consumer spending has shown signs of cooling off. A separate report released last week showed thatShoppers walk through the dairy section of a supermarket in Montebello, California, on Aug. 23, 2022.
Markets widely expect the Fed to approve a quarter-basis point increase at the conclusion of their two-day meeting next week and follow that up with another similarly sized hike in March for a peak rate of 5%. Federal Reserve Chair Jerome Powell speaks during a news conference at the Federal Reserve Board Building in Washington,D.C., on Dec. 14, 2022.by forcing employers to cut back on spending.
2.9% GDP growth is extremely high. Especially considering most people think we are in recession right now.