The US economy ended 2022 on a surprisingly positive note, despite a few hiccups along the way. According to official figures, the economy grew at a rate of 2.9% in the last quarter of the year, which is slower than the previous quarter’s 3.2% growth, but still better than expected.
Some analysts have expressed concerns that the US may be headed for a recession, but the job market remains strong with the unemployment rate hovering around historic lows. Despite this, other parts of the economy have been struggling. Retail sales took a hit in December, with a 1.1% drop from the previous month, and the manufacturing sector has also been suffering. Meanwhile, the stock market saw a sharp decline last year.
Despite these challenges, the main driver of the US economy, consumer spending, has remained solid, if slowing. For the full year, the economy grew by 2.1%, which is a drop from the previous year’s 5.9% growth. The fast pace of growth last year sparked a rapid rise in prices, leading the Federal Reserve to increase interest rates from near zero to more than 4%. This has encouraged consumers to save more and spend less, but it also poses the risk of triggering a severe slowdown that could result in widespread job loss.
Several major companies, such as 3M, Dow, IBM, and SAP, have recently announced job cuts, while others, like Chipotle, are hiring. The Federal Reserve remains hopeful that the economy will adjust without causing widespread job losses, and that their rate-hiking campaign will result in a “soft landing.”
Overall, the US economy has been performing well in the face of the Federal Reserve’s efforts to control inflation. However, some investors may remain cautious, as recent data suggests a possible recession. Nevertheless, as Richard Flynn, Managing Director at Charles Schwab UK, points out, “It’s clear the economy remains relatively strong in the face of the Fed’s efforts, suggesting they’re succeeding.”