US GDP Growth Slowed in Q4, Jobless Claims Unexpectedly Decline
The US Bureau of Economic Analysis released its second estimate for the fourth quarter 2022 Gross Domestic Product (GDP) on Thursday, showing an annualized rate of 2.7%, below the initial estimate and market expectation of 2.9%. The Personal Consumption Expenditures (PCE) Price Index rose 3.7%, more than the initial estimate of 3.2%, while the core measure that excludes food and energy was up to 4.3% from 3.5%.
The slower increase in GDP could be a sign that the Federal Reserve’s series of steep interest rate hikes are having more of an impact than previously thought. This month, the Federal Reserve raised its benchmark rate by only a quarter of a percentage point, the smallest such increase it has made in almost a year. PNC Chief Economist Gus Faucher warns this could lead to a recession later in 2023, although mild given the current strength of the labor market, strong consumer balance sheets, and a well-balanced housing market.
Separate figures on Thursday showed initial applications for unemployment insurance unexpectedly declined to a three-week low, down 3,000 from the prior week’s upwardly revised total of 195,000. PNC Senior Economist Stuart Hoffman notes that layoffs are not yet showing up in the unemployment insurance data, which may be attributed to the timing of severance pay. In January, the US economy saw an increase of 517,000 jobs, which was a far greater amount than economists had predicted. This resulted in the unemployment rate declining to 3.4%, a figure not observed since May 1969.
One of the most timely economic readings released by the government is the jobless claims, whereas the GDP report, especially this month's revision and next month's final estimate of fourth quarter growth, are among the least up-to-date readings monitored intently by economists and investors.
0. “US: Real GDP grows at an annual rate of 2.7% in Q4 vs. 2.9% expected” FXStreet, 23 Feb. 2023, https://www.fxstreet.com/news/us-real-gdp-grows-at-an-annual-rate-of-27-in-q4-vs-29-expected-202302231334
1. “US Fourth-Quarter GDP Revised Lower on Weaker Consumer Spending” msnNOW, 23 Feb. 2023, https://www.msn.com/en-us/money/markets/us-fourth-quarter-gdp-revised-lower-on-weaker-consumer-spending/ar-AA17QD9f
2. “The US economy grew less in fourth quarter than previously believed – Local News 8” LocalNews8.com, 23 Feb. 2023, https://localnews8.com/money/cnn-business-consumer/2023/02/23/the-us-economy-grew-less-in-fourth-quarter-than-previously-believed/
3. “The US economy grew less in fourth quarter than previously believed” WICZ, 23 Feb. 2023, https://www.wicz.com/story/48436750/the-us-economy-grew-less-in-fourth-quarter-than-previously-believed
4. “US growth figure revised downward” Bangkok Post, 23 Feb. 2023, https://www.bangkokpost.com/business/2513659/us-growth-figure-revised-downward