Home » US GDP stronger than expected: +2.9% in the fourth quarter. A ‘rates’ problem for Powell’s Fed?

US GDP stronger than expected: +2.9% in the fourth quarter. A ‘rates’ problem for Powell’s Fed?

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US GDP stronger than expected: +2.9% in the fourth quarter.  A ‘rates’ problem for Powell’s Fed?

The US economy is moving faster than expected, which raises new doubts about the Fed’s intentions.

In the fourth quarter of 2022, American GDP rose at an annualized rate of 2.9%, beyond the +2.6% expected by the consensus of analysts.

The US economy does not seem to be slowing significantly: and this could be a problem for Jerome Powell’s Fed, who has left no doubts about his intention to significantly curb the economy’s fundamentals, so as to be able to slow down also the race of inflation.

Positive indications from the macroeconomic front of the United States also came with the publication of the weekly claims for unemployment benefits, which fell by 6,000 units to 186,000. Yet another confirmation of the solidity of the US labor market.

These numbers are crucial to anticipating the outcome of the upcoming meeting of the FOMC, the monetary policy arm of the Fed.

The meeting will start next Tuesday 31st January and conclude with the announcement of rates on Wednesday 1st February.

The markets expect a further hike in fed funds rates by Jerome Powell & Co. of 25 or 50 basis points, confirming the battle against inflation that the US central bank continues to wage.

The one just released by the US Department of Commerce is the preliminary reading of the GDP, which will be followed by two revisions.

Growth marks a slowdown compared to the third quarter of 2022, when GDP had grown at a rate of 3.2%.

Examining the data, it emerges that consumer spending rose by 2.1% in the fourth quarter of 2022, at a lower rate than the +2.3% in the third quarter.

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On the other hand, consumer spending on durable goods improved by 0.5% compared to the previous decline of 0.8%.

Final sales instead grew by just 1.4%, compared to +4.5% in the previous quarter.

The Core PCE – the Federal Reserve’s preferred parameter for monitoring inflation trends – increased by 3.9%, just below the estimated +4%.

The worsening of exports is evident (-1.3% compared to +14.6% in the third quarter), while imports reduced the drop by -7.3% to -4.6%.

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