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The US economic system grew robustly within the fourth quarter, the federal government confirmed on Wednesday, however momentum has slowed considerably amid a surge in Covid-19 infections at the beginning of the 12 months, snarled provide chains and hovering inflation.
Gross home product elevated at a 6.9% annualized charge, the Commerce Division mentioned in its third estimate of fourth-quarter GDP progress. That was revised barely down from the 7.0% tempo estimated in February.
The economic system grew at a 2.3% charge within the third quarter. Development is 3.1% above its pre-pandemic stage. Economists polled by Reuters had anticipated GDP progress could be revised as much as a 7.1% charge. The revision to the fourth-quarter GDP studying mirrored downgrades to client spending and export progress.
For all of 2021, the economic system grew 5.7%, the strongest since 1984, after the federal government offered practically $6 trillion in pandemic aid. It contracted 3.4% in 2020, the most important drop in 74 years.
However that’s all within the rear-view mirror. An onslaught of coronavirus infections contributed to undercutting spending in addition to disrupting exercise at factories and providers companies early within the 12 months. Whereas infections have dramatically declined, resulting in the rolling again of restrictions throughout the nation, inflation is hovering as provide chains stay stretched.
The Federal Reserve this month raised its coverage rate of interest by 25 foundation factors, the primary hike in additional than three years and signaled an aggressive stance that has left the bond market fearing a recession down the highway. The broadly tracked US 2-year/10-year Treasury briefly inverted on Tuesday for the primary time since September 2019.
However economists mentioned the Fed’s large holdings of Treasuries and mortgage backed securities made it exhausting to get a transparent learn from the yield curve strikes.
“That is seemingly putting additional downward strain on longer- time period charges, and it might solely be as soon as steadiness sheet discount begins, seemingly in June, that we are going to get a greater sense of how a lot this can be distorting long-term yields decrease,” mentioned Andrew Hollenhorst, chief US economist at Citigroup in New York.
Economists count on the growth to proceed, with a tightening labor market and big financial savings cushioning households in opposition to excessive inflation.
Company earnings progress slowed considerably within the fourth quarter as home monetary companies suffered a lower. There have been additionally reasonable will increase in earnings of home nonfinancial companies and from the remainder of the world.
Company earnings with stock valuation and capital consumption changes elevated at a $20.4 billion charge within the fourth quarter after rising at a $96.9 billion tempo within the third quarter.
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