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US economy progress.

 The US eco­nomy pos­ted bet­ter than expec­ted growth in the final quarter of 2022, even as the Fed's

US dollars

rate rises star­ted to weigh heav­ily on busi­ness activ­ity. That marked a slow­down from 3.2 per cent growth in the third quarter, reflect­ing the steps the US cent­ral bank has taken to damp demand. The Fed is now pre­par­ing to deliver a quarter-point rate rise, from the cur­rent range of 4.25 per cent to 4.5 per cent, next week as it weighs how much higher to go now that infla­tion appears to have peaked. Offi­cials broadly back the fed­eral funds' rate hit­ting 5 per cent, and for that level to be main­tained at least to the end of the year, sug­gest­ing fur­ther rises to come bey­ond the Feb­ru­ary decision.

The gross domestic product data are the latest sign the eco­nomy has proved more resi­li­ent than expec­ted in the face of sub­stan­tially higher bor­row­ing costs while also show­ing the Fed's actions are begin­ning to have a more not­able effect. «Look­ing at the head­line, it's all look­ing good. But, look­ing under the hood, it's just those troub­ling signs and a loss of momentum that we've been see­ing really in broad swaths of the data,» said James Knight­ley, chief inter­na­tional eco­nom­ist at ING. The fourth-quarter increase was fuelled in part by busi­nesses amass­ing invent­or­ies, espe­cially across the man­u­fac­tur­ing and util­it­ies sec­tors.

Con­sumer spend­ing, one of the main drivers of the US eco­nomy, was also steady, increas­ing 2.1 per cent. In a fur­ther sign of weak­ness, fixed invest­ment sank 6.7 per cent, with hous­ing-related invest­ment con­tract­ing 26.7 per cent on an annu­al­ised basis. Busi­ness invest­ment rose just 0.7 per cent. From the fourth quarter of 2021 to the fourth quarter of 2022, real GDP increased by 1 per cent, com­pared with 5.7 per cent in the same period a year earlier.

While the over­all labour mar­ket remains robust, with the unem­ploy­ment rate hov­er­ing at a multi-dec­ade low of 3.5 per cent, there are con­cerns about the out­look for the eco­nomy. «We could see a third con­sec­ut­ive of neg­at­ive growth».

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  1. Steve27 January 2023 at 10:27

    The US economy is strong but businesses do need more help to be able to ride out this year. Many have had or will have to lay off employees just to survive. Any help from the government would mean more people keep their jobs.

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    1. Stuart27 January 2023 at 12:07

      We've already seen big companies like Microsoft or Amazon lay off a good number of people which isn't good. If such strong companies have to lay off so many people then what happens to little businesses?

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  2. Anonymous27 January 2023 at 14:13

    That increase is mostly because of businesses amassing inventories so it shouldn't fool us into thinking everything is going well. It isn't. Many businesses are suffering and might have to close their doors in the next few months.

    ReplyDelete

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