US GDP Slowed To 2.7% In 4th Quarter Of 2022 Due To Consumer Sentiment - Commerce Dept.

US real gross domestic product (GDP) grew by an annualized rate of 2.7% in the final quarter of last year, slower than the initial estimate and the market expectation of 2.9%, the Commerce Department said on Thursday

WASHINGTON (UrduPoint News / Sputnik - 23rd February, 2023) US real gross domestic product (GDP) grew by an annualized rate of 2.7% in the final quarter of last year, slower than the initial estimate and the market expectation of 2.9%, the Commerce Department said on Thursday.

The softer-than-initially-estimated growth was due to a drop in consumer sentiment, which accounts for about 70% of GDP, the Commerce Department said in a press release.

A pick-up in property-related investments and imports, however, mitigated some of the slide in consumer sentiment, the release said.

"The updated estimates primarily reflected a downward revision to consumer spending that was partly offset by an upward revision to nonresidential fixed investment," the release said. "Imports, which are a subtraction in the calculation of GDP, were revised up."

Economists said the slowing GDP was a reflection of the oncoming recession in the United States.

"This isn't a great report but the market may see it as shifting growth to Q1 2023 instead," economist Adam Button said on the ForexLive forum.

"The goods portion of the economy is in a full-on recession, with four consecutive quarters of contraction in a strong bullwhip effect from pandemic spending. Services (are) carrying all the weight but the momentum is slowing."

After a 5.9% growth in 2021, GDP had been projected to grow 2% for all of 2022 due to runaway inflation in the aftermath of the coronavirus pandemic measures and the Federal Reserve efforts to fight inflation with its most aggressive rate hikes in four decades.

In a bid to control surging prices, the Fed added 450 basis points to interest rates since March via eight rate hikes. Prior to that, interest rates peaked at just 25 basis points, as the central bank slashed them to nearly zero after the global COVID-19 outbreak in 2020. Rates now stand at a peak of 4.75%.

Inflation itself, as indicated by the Consumer Price Index (CPI) grew by 6.4% in the 12 months to January. The Fed's target is 2% per year.