UNITED STATES NEWS

US revises down last quarter’s economic growth to 2.7% rate

Feb 23, 2023, 5:00 PM | Updated: Feb 24, 2023, 7:07 am
FILE - Used car are on display on a lot in Wexford, Pa., Thursday, Sept. 29, 2022. The Commerce Dep...

FILE - Used car are on display on a lot in Wexford, Pa., Thursday, Sept. 29, 2022. The Commerce Department releases its revised estimate of how the U.S. economy fared in the fourth quarter on Thursday, Feb. 23, 2023. (AP Photo/Gene J. Puskar, File)

(AP Photo/Gene J. Puskar, File)

WASHINGTON (AP) — The U.S. economy expanded at a 2.7% annual rate from October through December, a solid showing despite rising interest rates and elevated inflation, the government said Thursday in a downgrade from its initial estimate.

The government had previously estimated that the economy grew at a 2.9% annual rate last quarter.

The Commerce Department’s revised estimate of the fourth quarter’s gross domestic product — the economy’s total output of goods and services — marked a deceleration from the 3.2% growth rate from July through September.

Thursday’s report revised down the government’s estimate of consumer spending growth in the October-December quarter, from a 2.1% rate to 1.4%. That was the weakest such showing since the first quarter of last year.

Business spending also slowed in the fourth quarter, suggesting that the economy lost momentum at the end of 2022.

More recent data, though, shows that the economy has since rebounded. Consumers boosted retail sales in January by the most in nearly two years, and employers added a surprisingly outsize number of jobs. The unemployment rate reached 3.4%, the lowest level since 1969.

Some of the surprisingly strong economic gains in January likely reflected much warmer-than-usual weather. Few economists expect similar outsize gains in hiring or spending in the coming months. Most analysts think growth is slowing to a roughly 2% annual rate in the current January-March quarter.

And the Federal Reserve is expected to keep raising its benchmark interest rate over the next few months and to keep it at a peak through year’s end to try to defeat still-high inflation. Minutes from its last policy meeting released Wednesday showed that all 19 Fed officials favored raising rates at the next two meetings.

“From the Fed’s perspective, a slowdown in the economy is anticipated and will be welcome news,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, a consulting firm. “However, even as growth slows, a focus on lowering elevated inflation means rates will move up further and will remain higher for longer.”

Higher borrowing costs make mortgages, auto loans and credit card borrowing more expensive. Those higher rates could discourage consumers and businesses from spending, hiring and investing and could eventually push the economy into a recession.

The economy’s growth at the end of 2022 reflected mainly a restocking of inventories, which will likely unwind in coming quarters, and a pickup in government spending. Housing investment fell nearly 26%; higher borrowing rates have crushed homebuying.

Inflation, measured year over year, has cooled since it reached 9.1% in June, having slowed to 6.4% in January. Yet on a monthly basis, price gains accelerated from December to January, raising the prospect that the Fed will raise its benchmark rate higher than it has previously signaled.

In Thursday’s GDP report, the government also sharply revised up its estimates of Americans’ incomes in the fourth quarter. After-tax income, adjusted for inflation, jumped 4.8%, a much larger gain than the previous 3.3% estimate.

The upward revisions reflected higher wages and salaries than was estimated earlier, and state stimulus payments that were intended to offset inflated costs of gas, food and other necessities. Twenty-one states, including California, Colorado, Florida, New York, Idaho and Pennsylvania issued one-time payments last year, typically in the form of tax refunds.

The boost in incomes could continue to support consumer spending this year and might have helped drive retail sales up in January. If so, stronger consumer spending could force the Fed to continue raising rates or keep them elevated for longer to cool the economy and quell inflation.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


              FILE - A shopper carries bags down Fifth Avenue on Friday, Nov. 25, 2022, in New York. The Commerce Department releases its revised estimate of how the U.S. economy fared in the fourth quarter on Thursday, Feb. 23, 2023.  (AP Photo/Julia Nikhinson, File)
            
              FILE - Used car are on display on a lot in Wexford, Pa., Thursday, Sept. 29, 2022. The Commerce Department releases its revised estimate of how the U.S. economy fared in the fourth quarter on Thursday, Feb. 23, 2023. (AP Photo/Gene J. Puskar, File)

United States News

In this photo provided by the Florida Keys News Bureau, the sun rises above the Atlantic Ocean in t...
Associated Press

Local teen wins 7 Mile Bridge Run in Florida Keys

MARATHON, Fla. (AP) — A Florida teenager and an Atlanta woman won the overall men’s and women’s divisions Saturday at a footrace across the longest of 42 highway bridges over water in the Florida Keys. Vaclav “Vance” Bursa, 15, of Big Pine Key, Florida, finished first overall in the annual 7 Mile Bridge Run, posting […]
10 hours ago
Associated Press

Shipbuilder Austal executives accused of inflating earnings

MONTGOMERY, Ala. (AP) — Three current and former former executives of a shipbuilder that constructs vessels for the U.S. Navy have been indicted on accounting fraud charges accusing them of falsely inflating the company’s reported earnings, federal prosecutors said. Craig Perciavalle, 52, Joseph Runkel, 54, and William Adams, 63, all of Mobile, Alabama, where Austal […]
10 hours ago
FILE - Wisconsin Supreme Court candidates Republican-backed Dan Kelly and Democratic-supported Jane...
Associated Press

Wisconsin Supreme Court control, abortion access at stake

MADISON, Wis. (AP) — abortion access, Republican-drawn legislative maps and years of GOP policies in the key swing state rests with the outcome an election Tuesday that has seen record campaign spending. The winner of the high-stakes contest between Democratic-supported Janet Protasiewicz will determine majority control of the court headed into the 2024 presidential election. […]
10 hours ago
Associated Press

Gas prices increase in NJ, around nation amid higher demand

TRENTON, N.J. (AP) — Gas prices increased in New Jersey and around the nation at large amid increased demand as warmer spring weather lures motorists back out onto the roads, analysts said. AAA Mid-Atlantic says the average price of a gallon of regular gas in New Jersey on Friday was $3.25, an increase of two […]
10 hours ago
Ramadan decorations are displayed at a Party City store in Dearborn, Mich., on Thursday, March 23, ...
Associated Press

Lanterns and crescents: more retailers court Ramadan buyers

With her 3-year-old daughter sitting inside a red Target shopping cart, Aya Khalil looked through the aisles with anticipation. The author was on a mission: See for herself that her children’s book about a boy and his grandmother baking for an Islamic feast was actually carried by her local Target store in Toledo. “Oh my […]
10 hours ago
Associated Press

Tornadoes kill at least 11 across US Midwest and South

WYNNE, Ark. (AP) — Tornadoes that tore through parts of the South and Midwest killed at least 11 people, collapsed the roof of a packed theater during a heavy metal concert in Illinois, and left small towns and big cities throughout the region bewildered Saturday by the damage. Possibly dozens of tornadoes touched down into […]
10 hours ago

Sponsored Articles

(Photo: OCD & Anxiety Treatment Center)...

Here’s what you need to know about OCD and where to find help

It's fair to say that most people know what obsessive-compulsive spectrum disorders generally are, but there's a lot more information than meets the eye about a mental health diagnosis that affects about one in every 100 adults in the United States.
...
Fiesta Bowl Foundation

Celebrate 50 years of Vrbo Fiesta Bowl Parade magic!

Since its first production in the early 1970s, the Vrbo Fiesta Bowl Parade presented by Lerner & Rowe has been a staple of Valley traditions, bringing family fun and excitement to downtown Phoenix.
...
Quantum Fiber

How high-speed fiber internet edges out cable for everyday use

In a world where technology drives so much of our daily lives, a lack of high-speed internet can be a major issue.
US revises down last quarter’s economic growth to 2.7% rate