The United States economy expanded at a 2.7 percent annual rate from October through December 2022, 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 percent annual rate last quarter.
The US Department of Commerce’s revised estimate of the fourth quarter’s gross domestic product (GDP) — the economy’s total output of goods and services — marked a deceleration from the 3.2 percent 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 percent rate to 1.4 percent. 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.
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 percent annual rate in the current January-March quarter.
Higher interest rates
“The year as a whole was weak and the economy is sure to have a difficult 2023 as it struggles under the weight of the interest rate increases orchestrated by the Federal Reserve to quell the painfully high inflation,” warned Scott Hoyt, senior director of analytics at ratings agency Moody’s.
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. The minutes from its last policy meeting, released Wednesday, showed that all 19 Fed officials favoured 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 US 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 percent; higher borrowing rates have crushed homebuying.
Inflation, measured year over year, has cooled since it reached 9.1 percent in June, having slowed to 6.4 percent in January. Yet on a monthly basis, price gains accelerated from December to January, raising the prospect that the Fed will boost its benchmark rate higher than it has previously signalled.
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 percent, a much larger gain than the previous 3.3 percent estimate.
The upward revisions reflected higher wages and salaries than were estimated earlier, and state stimulus payments that were intended to offset inflated costs of petrol, 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.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
