A Department of Commerce statement, released on Thursday, January 26, reported fourth quarter and year-end preliminary findings on the US economy.
FOURTH QUARTER FINDINGS
In the fourth quarter of 2022, the US economy experienced positive GDP, consumer spending, and disposable income growth, according to the report.
In fact, the US economy saw real gross domestic product (GDP) increase at a rate of 2.9 percent, adjusted for inflation, which is a slight decrease from the previous quarter’s 3.2 percent GDP growth rate.
Additionally, consumer spending, or the total money spent on goods for personal use, grew 2.1 percent in the fourth quarter, and disposable personal income increased $54.6 billion between the third and fourth quarters. Current-dollar personal income increased another $311.0 billion in the fourth quarter, a $27.9 billion increase from the third quarter. These findings show that people are still able to enjoy the economy at its current level.
Another bright spot of the report was the increased personal savings rate, or personal saving as a percentage of a person’s disposable income. In the third quarter, the rate was 2.7 percent, but in the fourth quarter it was 2.9 percent which means that total personal savings was $45.2 billion more in the fourth quarter than the third quarter.
The positive fourth quarter report is evidence of national economic resiliency. Earlier this year, as inflation soared and the US economy took a downturn, potential recession talks began, but as these numbers show, the economy rebounded and could potentially positively propel the country into the new year.
YEAR END FINDINGS
The report also included preliminary economic findings for the past year as a whole. In 2021, real GDP grew 5.9 percent, but, in 2022, GDP only increased 2.1 percent. Additionally, current-dollar GDP decreased from 10.7 percent in 2021 to 9.2 percent in 2022.
The decrease in GDP growth between 2021 and 2022 is what to be expected after a recession like the one seen in 2020. The economy bounced back with high levels of GDP growth in 2021 to recover from losses caused by the pandemic. The same growth cannot be expected after initial recovery, but the US economy still showed tremendous resiliency in 2022. Despite record high inflation and a war in Europe that affected economies across the world, the US economy was still able to hold on and see some positive growth.
As 2023 begins and high interest rates have begun affecting the housing market, economists are still not ruling out the possibility of another recession or economic downtown.
High interest rates have resulted in a decline in the construction causing some projects to be canceled entirely. Adding to this, fewer people are willing to purchase homes at such a high borrowing cost. In the fourth quarter of 2022, alone, the housing industry was responsible for taking off 1.3 percent of the total potential GDP. If savings rates continue to stay too high for borrowers, it could have catastrophic effects on the national economy.
Additionally, while consumer spending was high in the fourth quarter, some economists predicted it to be higher, leading to concerns over whether it will continue to slow down which would impact the economy further.
The US economy has seen major ebbs and flows over the past couple of years, but its resiliency this past year is positive. Despite this, no forecast, positive or negative, is out of the question yet.
*It is important to note that all of the data from this report is preliminary. Another report of these findings will be released on February 23 before the third report. with the most accurate data, comes out on March 30.