US Q4 2022 GDP Revised Down to 2.6%: What Does This Mean for the Economy?

The Q4 2022 US GDP was revised down from 2.7% to 2.6%, which is a slight dip compared to the Q3 figure of 3.2%. Due to weaker consumer spending than initially reported, the U.S. economy’s growth rate for the end of 2022 has been revised down once more to 2.6%. The inflation-adjusted GDP figures have been slightly lowered compared to the prior estimate of 2.7%. The last GDP estimation for the fourth quarter of the previous year was published on Thursday, revealing a decrease in household spending and business investment towards the end of the year.[0]

The second and final revision to US Gross Domestic Product (GDP) is out this morning: +2.6% is 10 basis points (bps) downwardly revised from the first revision, which was down from +2.9% in the initial print.[1] The percentage has decreased from the +3.2% witnessed in Q3 of the previous year, subsequent to two quarters of negative GDP, -1.6% and -0.6%, in that order. The GDP growth rate for the year 2022 has been recorded at +3.9%, which is 200 basis points lower than the robust growth rate of 2021. The latter year was marked by the Great Reopening from the Covid pandemic.[1]

Initially, the government said gross domestic product has increased at a 2.9% annual pace. Last month, the estimation was decreased to 2.7%, and now it has been further decreased. The economy’s official scorecard is GDP.[2]

The Commerce Department’s third and final report for the last quarter shows a 2.6% growth in the inflation-adjusted gross domestic product, which is the most comprehensive indicator of economic activity. Although Silicon Valley Bank unexpectedly collapsed earlier this month, the Federal Reserve decided to increase interest rates once more to control inflation. Despite some economists’ expectations of a pause in tightening to alleviate concerns of a banking crisis, the central bank still increased rates by a modest quarter percentage point.[0]

The central bank, Federal Reserve, has announced its intention to increase interest rates only once in the future. However, if prices do not decrease at a quicker pace, the bank may need to escalate its efforts. Higher rates typically slow the economy and often lead to a recession.[2] The US economy grew 2.6% during the fourth quarter, slower than previously estimated.[3] The initial projection for growth was 2.9%, but it was revised downwards to 2.7% last month. The central bank, Federal Reserve, has announced its intention to increase interest rates only once in the future. However, if prices do not decrease at a quicker pace, the bank may need to escalate its efforts. Higher rates typically slow the economy and often lead to a recession.[2]

Despite this, the US economic data remains robust, with GDP figures still showing growth, albeit slightly lower than previously estimated. The downward revision was due to weaker consumer spending than originally reported. However, household spending and business investment were still positive, showing strength in the face of economic challenges.

While the Fed’s decision to raise interest rates may be seen as a risk to the economy, it is also a proactive measure to combat inflation. The central bank is hoping that by raising rates, it can slow down the economy and prevent inflation from rising too quickly. However, if prices don’t recede faster, the Fed may have to raise interest rates further, which could lead to a recession.

Overall, the US economy is still showing signs of growth, despite the slight dip in GDP figures. The country’s economic data remains robust and household spending and business investment are still positive. The Fed’s decision to raise interest rates may be seen as a risk, but it is also a proactive measure to prevent inflation from rising too quickly. As the US continues to navigate economic challenges, it is important to continue monitoring economic data and making adjustments as needed.

0. “GDP grew at 2.6% rate in fourth quarter of 2022 despite pressure from rising rates” Washington Examiner, 30 Mar. 2023, https://www.washingtonexaminer.com/policy/economy/gdp-grew-at-2-6-rate-in-fourth-quarter-of-2022-despite-pressure-from-rising-rates

1. “Q4 GDP Ticks Down to +2.6%; Jobless Claims Stay Low” Zacks Investment Research, 30 Mar. 2023, https://www.zacks.com/stock/news/2072476/q4-gdp-ticks-down-to-26-jobless-claims-stay-low

2. “U.S. GDP in fourth quarter trimmed again to 2.6% on weaker consumer spending” Morningstar, 30 Mar. 2023, https://www.morningstar.com/news/marketwatch/20230330397/us-gdp-in-fourth-quarter-trimmed-again-to-26-on-weaker-consumer-spending

3. “The US economy grew 2.6% during the fourth quarter, slower than previously estimated” CNN, 30 Mar. 2023, https://www.cnn.com/2023/03/30/economy/us-gdp-4q-final/index.html