In 2022, the U.S. economy grew by 2.1% despite recession fears, according to The Washington Post. The economy had grown by 5.7% in 2021—its strongest performance since 1984.
The economy grew by 2.9% from October 2022 to December 2022, which was slightly down from 3.2% in the previous quarter. Consumer spending on services such as health care and utilities contributed to the fourth-quarter growth, especially considering the slumps in sectors such as housing and manufacturing; consumer spending makes up more than 70% of GDP and is a crucial part of the equation.
The Federal Reserve raised interest rates seven times in 2022—and is expected to do so again this week—in hopes businesses and households would cut back enough in the face of higher borrowing costs to slow the economy and price increases.
Economists say it could be months before inflation returns to normal, and many major banks are forecasting an economic downturn in 2023.
“You may see [growth] and think the economy is out of the woods, but that would be entirely the wrong read,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities America. “There are a lot of variables that are all pointing in the same direction: There’s a housing recession. Manufacturing looks like it’s approaching recession. We’re seeing weakness in temp hiring. And it’s doubtful we’ve felt the full effects of all of the Fed’s rate hikes.”