The burden of elevated prices and higher borrowing costs is mounting, pointing to a tenuous outlook for the world’s largest economy.
| The US economy remained resilient last year in the face of inflation, war and a Federal Reserve intent on curbing the pace of growth. A repeat performance in 2023 is far from guaranteed., expanded at an annual rate of 2.9 per cent in the fourth quarter of 2022, the Commerce Department said on Thursday .
Over the year as a whole, as measured from the fourth quarter a year earlier, GDP expanded 1 per cent, down sharply from 5.7 per cent growth in 2021.“Two-thousand-and-twenty was the pandemic; 2021 was the bounceback from the pandemic; 2022 was a transition year,” said Jay Bryson, chief economist for Wells Fargo.
Already, there are signs of strain, especially in the sectors most sensitive to higher borrowing costs. Construction activity and home sales have slowed significantly. Tech companies have announced tens of thousands of layoffs recently. Manufacturing output fell in November and December.Still, in the consumer-driven US economy, a recession is all but impossible as long as households keep opening their wallets. So far, they have done so. Consumer spending rose at a 2.
For the economy, that willingness to spend is a source of strength – but also of trouble. The Fed is trying to tamp down spending in an effort to control inflation. If consumers don’t pull back, policymakers may feel the need to be more aggressive, increasing the risk that they will go too far and push the economy into a recession.
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