26 January 2023 | Other

Strong growth in U.S. economy is expected in fourth quarter however, outlook deteriorates

The U.S. economy likely saved the high growth rates in the fourth quarter, as buyers increased expenditures for goods. However, its dynamics seem to have slowed down significantly by the end of the year, as rising interest rates undermine demand.

The Commerce Department's advance report on GDP in the fourth quarter, released on Thursday, shows that it was the last quarter of stable growth. Then the delayed effects of the fastest Fed tightening cycle since the 1980s will enter into force. Most economists forecast a recession by the second half of the year. This recession will be mild compared to the previous downturns.

Retail sales sharply decreased for the last two months. The production seems to stay in recession as the housing market. While the labor market remains strong, business sentiment continues to deteriorate, and this could ultimately hurt hiring.

Reuters polled the economists. According to this poll, last quarter, GDP growth might increase by 2.6% year-on-year after accelerating by 3.2% in the third quarter. Estimates ranged from 1.1% to 3.7%.

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