CHICAGO — Real gross domestic product (GDP) grew at an annual rate of 2.9% in the fourth quarter (Q4) of 2022, according to the advanced estimate from the Bureau of Economic Analysis, which, according to third quarter (Q3) data, real GDP increased by 3.2%.
The first estimate indicates that the increase in real GDP reflects increases in private investment in inventories, consumer spending, federal, state, and local government spending, and nonresidential fixed investment. The increases in these areas were partly offset by declines in residential fixed investment and exports. Imports declined in the fourth quarter, but less than in the third quarter.
According to the Bureau of Economic Analysis, the slower real GDP growth in the fourth quarter compared with the third quarter reflected slowdowns in nonresidential fixed investment, state and local government spending, and consumer spending. These slowdowns were partly offset by an increase in private inventory investment, an acceleration in federal government spending, and a smaller decline in residential fixed investment.
Current dollar personal income increased by $311 billion in the fourth quarter, compared with $283.1 billion in the third quarter; personal disposable income increased by 6.5% in the fourth quarter, compared with 5.4% in the third quarter; real disposable income increased by 3.3% in the fourth quarter; and the personal savings rate was 2.9% in the fourth quarter, compared with 2.7% in the third quarter.
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Although this estimate is only the first and is subject to change, the initial report on real GDP is a reason for optimism as it suggests that the economy is not in recession and that inflation has not prevented consumer spending from being positive, even though it weakened from 2.3% in the third quarter to 2.1% in the fourth quarter.
Another economy Ministry of Labor reportThe survey, released Jan. 26, showed that initial weekly jobless claims fell by 6,000 to 186,000. That’s the lowest level since April 2022 and well below the Dow Jones estimate of 205,000, according to CNBC. That’s a positive sign, as a decline in initial jobless claims is associated with a growing economy, and the market often rallies when unemployment falls.
““The report was generally quite positive, so the market took it as good news and stocks went up,” Rupert said. Ph.D., professor of economics at the University of California, Santa Barbara (University of California, San Francisco), director of the Economic Forecasting Project and associate director of UCSB’s Global Economics and Finance Lab, said. “Consumption has continued to grow at a solid pace, increasing consumption by 2.1% on an annual basis. At this point, we are quite far from recession. Initial jobless claims fell again last week. The bottom line is that the economy is continuing to move forward and hopefully will convince some of those who think we are at the beginning of a period of pessimism. That said, no one can really predict where the economy will turn.”
In Europe, Goldman Sachs expects the eurozone economy to grow 0.6% this year, compared with its previous forecast of a 0.1% contraction, indicating that while growth in the region may be weak, a recession is not imminent, according to Goldman Sachs. ReutersEurozone inflation is also expected to be lower than expected in 2023. The forecast for growth in the eurozone economy is driven by lower natural gas prices and the reopening of China’s borders.
The second fourth-quarter estimate from the U.S. Bureau of Economic Analysis will be released on February 23, 2023.
Contact Peter Rupert at peter.rupert@ucsb.edu