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The numbers: The economy grew a touch slower at a 2.7% annual pace at the end of 2022, revised government figures show, largely because consumers cut back on spending.
The increase in gross domestic product, the official scorecard of the economy, was lowered from an initial 2.9% growth rate.
Consumer spending, the main engine of the economy, grew at a 1.4% annual clip instead of 2.1% as originally reported. That mostly explained the downgrade in GDP.
The slowdown in spending suggests the new year got off to a weak start. Economists say the U.S. will will be hard-pressed to match even the modest performance of the fourth quarter in the first three months of 2023.
Early economic data indicate the U.S. is on track to expand at a far slower pace or even contract.
Rising interest rates and high inflation have forced consumers and businesses to trim spending and investment, most notably in interest-sensitive sectors such as housing and construction.
Big picture: The U.S was widely expected to slip into recession in 2023 as the Federal Reserve tightened the screws. The Fed plans to keep raising interest rates to snuff out inflation, putting an expansion that began in mid-2020 at risk.
Consumers are still spending enough money to keep the economy afloat, though, even at the softer fourth-quarter rate.
They’ve been aided by the job security resulting from the tightest labor market in modern times. The unemployment rate stands near a 54-year low of 3.4%.
Many companies are still hiring, meanwhile, and others are reluctant to lay off workers given how hard it was to recruit them in the first place.
Now, more forecasters think the Fed might achieve a so-called soft landing — taming inflation without a recession.
Market Reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open higher on Thursday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose slightly to 3.96%.
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