AP

US revises down last quarter’s economic growth to 2.7% rate

Feb 22, 2023, 3:34 PM | Updated: Feb 23, 2023, 7:27 am

FILE - Used car are on display on a lot in Wexford, Pa., Thursday, Sept. 29, 2022. The Commerce Dep...

FILE - Used car are on display on a lot in Wexford, Pa., Thursday, Sept. 29, 2022. The Commerce Department releases its revised estimate of how the U.S. economy fared in the fourth quarter on Thursday, Feb. 23, 2023. (AP Photo/Gene J. Puskar, File)

(AP Photo/Gene J. Puskar, File)

WASHINGTON (AP) — The U.S. economy expanded at a 2.7% annual rate from October through December, a solid showing despite rising interest rates and elevated inflation, the government said Thursday in a downgrade from its initial estimate.

The government had previously estimated that the economy grew at a 2.9% annual rate last quarter.

The Commerce Department’s revised estimate of the fourth quarter’s gross domestic product — the economy’s total output of goods and services — marked a deceleration from the 3.2% growth rate from July through September.

Thursday’s report revised down the government’s estimate of consumer spending growth in the October-December quarter, from a 2.1% rate to 1.4%. That was the weakest such showing since the first quarter of last year.

Business spending also slowed in the fourth quarter, suggesting that the economy lost momentum at the end of 2022.

More recent data, though, shows that the economy has since rebounded. Consumers boosted retail sales in January by the most in nearly two years, and employers added a surprisingly outsize number of jobs. The unemployment rate reached 3.4%, the lowest level since 1969.

Some of the surprisingly strong economic gains in January likely reflected much warmer-than-usual weather. Few economists expect similar outsize gains in hiring or spending in the coming months. Most analysts think growth is slowing to a roughly 2% annual rate in the current January-March quarter.

And the Federal Reserve is expected to keep raising its benchmark interest rate over the next few months and to keep it at a peak through year’s end to try to defeat still-high inflation. Minutes from its last policy meeting released Wednesday showed that all 19 Fed officials favored raising rates at the next two meetings.

“From the Fed’s perspective, a slowdown in the economy is anticipated and will be welcome news,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, a consulting firm. “However, even as growth slows, a focus on lowering elevated inflation means rates will move up further and will remain higher for longer.”

Higher borrowing costs make mortgages, auto loans and credit card borrowing more expensive. Those higher rates could discourage consumers and businesses from spending, hiring and investing and could eventually push the economy into a recession.

The economy’s growth at the end of 2022 reflected mainly a restocking of inventories, which will likely unwind in coming quarters, and a pickup in government spending. Housing investment fell nearly 26%; higher borrowing rates have crushed homebuying.

Inflation, measured year over year, has cooled since it reached 9.1% in June, having slowed to 6.4% in January. Yet on a monthly basis, price gains accelerated from December to January, raising the prospect that the Fed will raise its benchmark rate higher than it has previously signaled.

In Thursday’s GDP report, the government also sharply revised up its estimates of Americans’ incomes in the fourth quarter. After-tax income, adjusted for inflation, jumped 4.8%, a much larger gain than the previous 3.3% estimate.

The upward revisions reflected higher wages and salaries than was estimated earlier, and state stimulus payments that were intended to offset inflated costs of gas, food and other necessities. Twenty-one states, including California, Colorado, Florida, New York, Idaho and Pennsylvania issued one-time payments last year, typically in the form of tax refunds.

The boost in incomes could continue to support consumer spending this year and might have helped drive retail sales up in January. If so, stronger consumer spending could force the Fed to continue raising rates or keep them elevated for longer to cool the economy and quell inflation.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Juanita Beach Kirkland...

Kathy McCormack and Nick Perry, The Associated Press

‘Tis the season for swimming and bacteria alerts in lakes, rivers

With summer about to start, many people flocking to their favorite swimming holes may also want to read up on bacteria warnings.

16 hours ago

Image: Members of the Makah Indian tribe paddle away from the rising sun as they head from Neah Bay...

Associated Press

Washington’s Makah Tribe clears major hurdle toward resuming traditional whale hunts

The U.S. granted the Makah Indian Tribe a long-sought waiver that helps clear the way for its first sanctioned whale hunts since 1999.

2 days ago

jerry west...

Tim Reynolds, The Associated Press

Jerry West, a 3-time Hall of Fame selection and the NBA logo, dies at 86

Jerry West, a three-time Basketball Hall of Fame inductee whose silhouette is considered to be the basis of the NBA logo, died Wednesday morning.

3 days ago

Photo: Construction vehicles are parked outside of the Station U & O building on Tuesday, June 11, ...

Haleluya Hadero, The Associated Press

Amazon adds $1.4B to affordable housing fund for regions where it has corporate offices

Amazon is adding $1.4B to a fund for building more affordable housing in regions where the company has major corporate offices.

4 days ago

hunter biden...

Randall Chase and the Associated Press

Hunter Biden convicted of all 3 felony charges in federal gun trial

Hunter Biden has been convicted of all three felony charges related to the purchase of a revolver in 2018, but no sentencing date was set.

4 days ago

Photo: A Bremerton man who made 20 "swatting" calls around the U.S. and in Canada, prompting real e...

Associated Press

Bremerton man sentenced for 20 ‘swatting’ calls of false threats in US, Canada

A Bremerton man who made 20 "swatting" calls around the U.S. and in Canada, prompting real emergency responses, has been sentenced.

5 days ago

US revises down last quarter’s economic growth to 2.7% rate