The Commerce Department released a report on Thursday showing U.S. economic activity surged by more than expected in the fourth quarter of 2022.
The report said real gross domestic product shot up by 2.9 percent in the fourth quarter after spiking by 3.2 percent in the third quarter. Economists had expected GDP to jump by 2.6 percent.
The stronger than expected GDP growth reflected increases in private inventory investment, consumer spending, government spending, and non-residential fixed investment.
Meanwhile, the positive contributions were partly offset by decreases in residential fixed investment and exports.
“The 2.9% annualized rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter went on,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.
He added, “We still expect the lagged impact of the surge in interest rates to push the economy into a mild recession in the first half of this year.”
The slower GDP growth compared to the previous quarter partly reflected a slowdown in the pace of growth in consumer spending, which jumped by 2.1 percent in the fourth quarter after surging by 2.3 percent in the third quarter.
Decelerations in non-residential fixed investment and state and local government spending also contributed to the slower growth along with a downturn in exports, which slumped by 1.3 percent in the fourth quarter after spiking by 14.6 percent in the third quarter.
The Commerce Department said these movements were partly offset by an upturn in private inventory investment, an acceleration in federal government spending and a smaller decrease in residential fixed investment.
On the inflation front, the report showed core consumer price growth, which excludes food and energy prices, slowed to 3.9 percent in the fourth quarter from 4.7 percent in the third quarter.