U.S. GDP Rose 2.9% in the Fourth Quarter After a Year of High Inflation

Quarter capped year of economic slowdown, reflecting return to more normal pace of growth.

The U.S. economy grew at a solid 2.9% annual rate last quarter but entered this year with less momentum as rising interest rates and still-high inflation weighed on demand.

U.S. growth in the fourth quarter was down slightly from a 3.2% annual rate in the third quarter, the Commerce Department said Thursday. Consumer spending helped drive the fourth-quarter gain, while the housing market weakened and businesses cut back their spending on equipment.

The October-to-December period capped a year of economic slowdown with growth of 1% in the fourth quarter of 2022 compared with a year earlier, down sharply from 5.7% growth in 2021. The slowdown in part reflected a return to a more normal pace of growth after output surged amid business reopenings, fiscal stimulus and a waning pandemic in 2021.

“Outside of the labor market, we’re really seeing a broad-based slowing in economic activity,” said Kathy Bostjancic, chief economist at Nationwide. “It’s not going to be a soft landing.”

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