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 – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
OTTAWA – The economy added 47,000 jobs in September, while the unemployment rate declined for the first time since January to 6.5 per cent, Statistics Canada reported on Friday.
The agency says youth and women aged 25 to 54 drove employment gains last month, while full-time employment saw its largest gain since May 2022.
The overall job gains followed four consecutive months of little change, the agency said.
The unemployment rate has been steadily climbing over the past year and a half, hitting 6.6 per cent in August.
Inflation that month was two per cent, the lowest level in more than three years as lower gas prices helped it hit the Bank of Canada’s inflation target.
The central bank has cut its key interest rate three times this year, and is widely expected to keep cutting as inflation has subsided and the broader trend points to a weakening in the labour market.
Despite the job gains in September, the employment rate was lower in the month, reflecting continued growth in Canada’s population.
Statistics Canada said since the employment rate saw its most recent peak at 62.4 per cent in January and February 2023, it’s been following a downward trend as population growth has outpaced employment growth.
On a year-over-year basis, employment was up by 1.5 per cent in September, while the population aged 15 and older in the Labour Force Survey grew 3.6 per cent.
The information, culture and recreation industry saw employment rise 2.6 per cent between August and September, after seven months of little change, Statistics Canada said, with the increase concentrated in Quebec.
The wholesale and retail trade industry saw its first increase since January at 0.8 per cent, while employment in professional, scientific and technical services was up 1.1 per cent.
Average hourly wages among employees rose 4.6 per cent year-over-year to $35.59, a slowdown from the five-per-cent increase in August.
The unemployment rate among Black and South Asian Canadians between 25 and 54 rose year-over-year in September and was significantly higher than the unemployment rate for people who were not racialized and not Indigenous.
Black Canadians in that age group saw their unemployment rate rise to 11 per cent last month while for South Asian Canadians it was 7.3 per cent. For non-racialized, non-Indigenous people, it rose to 4.4 per cent.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
