Sluggish 0.7% US Economic Growth in Q4 Reported by Commerce Dept

The U.S. economy, hobbled by last fall's 43-day government shutdown, advanced at a sluggish 0.7% annual rate from October through December, the Commerce Department reported on Friday in a big downgrade of its initial estimate. Growth in gross domestic product — the broadest measure of economic output — slowed sharply from the 2.4% annual pace recorded in the July-September quarter.

The latest GDP figure was a significant pullback from the department's initial 2.6% estimate for the fourth quarter, reflecting a slowdown in consumer spending and business investment. Exports also declined in the final three months of 2022 as the strong U.S. dollar and weakening global demand weighed on sales abroad.

The sluggish growth underscores the challenges facing the U.S. economy as the Federal Reserve has been rapidly raising interest rates to combat high inflation. Consumer spending, which accounts for about 70% of U.S. economic activity, grew at a 2.1% annual rate in the fourth quarter, down from the 2.3% initial estimate.

The government shutdown that occurred from October 1 to November 13, 2021, disrupted economic activity and weighed on growth during the quarter. Trade was also a drag, with exports falling 1.6% and imports rising 4.6%.

Despite the slowdown, the U.S. economy expanded for the eighth consecutive quarter after emerging from the COVID-19 pandemic-induced recession. For the full year of 2022, the economy grew 2.1%, down from 5.9% growth in 2021.

Analysts expect the economy to continue slowing in 2023 as the Federal Reserve raises interest rates further to cool inflation. Recession fears have been mounting, though the economy has so far avoided a downturn.

The revised GDP data underscores the volatile and uneven nature of the U.S. recovery from the pandemic. Businesses and consumers have been grappling with supply chain disruptions, labor shortages, and high inflation, which have all weighed on economic growth.

Despite the challenges, the U.S. economy has shown resilience, with the unemployment rate remaining low at 3.5% and consumer spending continuing to support the recovery.