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The Economy: What's Working, What's Not, & What's Next.

The Economy: What's Working, What's Not, & What's Next.

January 27, 2023
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The US economy saw a growth rate of 2.9% in the fourth quarter of 2022, according to the Bureau of Economic Analysis. This is a slight decrease from the previous quarter's growth rate of 3.2%. The growth was driven by a variety of factors, including an increase in private inventory investment, consumer spending, government spending at all levels, and nonresidential fixed investment. However, this growth was partly offset by decreases in residential fixed investment and exports.

Manufacturing, mining, utilities, and construction industries were the leading contributors to the increase in private inventory investment. Consumer spending also increased, with motor vehicles and parts being the primary driver. Government spending at the federal level was led by non-defense spending, while state and local government spending was driven by an increase in compensation for government employees. Nonresidential fixed investment was led by intellectual property products.

On the other hand, there were also areas of decline in the economy. Residential fixed investment decreased, with new single-family construction and broker's commissions being the primary drivers of this decline. Additionally, exports decreased, leading to a downturn in real GDP in the fourth quarter. Overall, while the US economy saw growth in the fourth quarter, there were also areas of decline and deceleration that should be taken into consideration.

So what happens next?

It would be reasonable expect the economy to continue to recover, but at a slower pace than in the initial stages of the recovery. Factors such as rising interest rates and inflation may also have a dampening effect on economic growth. Additionally, there may be uncertainty surrounding government policies and their impact on the economy. Overall, it's not unreasonable to anticipate a moderate level of economic growth in the near term, with some potential challenges and uncertainties.

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