The end of last year was supposed to be an economic dud. It wasn’t. Instead, the American economy likely continued its rebound.
The first look at the fourth quarter Gross Domestic Product will be released Thursday. As the quarter began, many economists predicted the economy would shrink as 2022 ended under the weight of high inflation, higher interest rates and general uncertainty about the months ahead.
Now, the economists think the economy grew almost 2%, and the Federal Reserve Bank of Atlanta’s GDP Now estimate forecasts economic growth of 3.5%. That would mark the fastest economic expansion of the year.
“Fourth quarter GDP growth is looking better than previously expected,” Federal Reserve Bank of St. Louis President James Bullard told a group of Wisconsin bankers earlier this month. He noted how some forecasts predicted a recession, but “that’s turning out not to be the case.”
Far from it, it appears. Instead, the American economy grew faster in the second half of 2022 than it usually does. It gained momentum even as the Federal Reserve quickly raised borrowing costs in hopes of containing and reversing red-hot inflation.
The GDP data does not jibe with the gloomy and persistent talk of a recession. An economic fait accompli this is not.
Inflation is cooling, though still uncomfortably high. The job market remains strong, though the cadence of layoffs, especially among technology firms, remains brisk. The American consumer has shown to be resilient to higher interest rates, though household debt has been climbing fast.
Moody’s Analytics chief economist Mark Zandi called it a “slowcession.” He still contends recession is a “serious threat” in 2023, but now thinks the U.S. will avoid an economic downturn.
“With a bit of luck and some reasonably deft policymaking by the Fed, the economy should avoid an outright downturn,” Zandi wrote recently.
As the recession talk continues, the economy has been recovering.
Tom Hudson is a financial journalist in Washington, D.C. He’s chief content officer at WAMU public radio station.
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