The economy continued to grow in the fourth quarter of 2022, with consumer spending and private inventory investment helping increase GDP for the second consecutive quarter. In addition to economic growth, data suggests that inflation is cooling. The GDP price index rose 3.5% in the fourth quarter, down from a 9% increase in the second quarter and a 4.4% increase in the third quarter, according to an analysis by the NAHB.
Also, the Personal Consumption Expenditures (PCE) price Index, capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior, rose 3.2% in the fourth quarter, compared with a 7.5% increase in the first quarter of 2022. Looking forward, only a mild recession is expected for this cycle due to the Federal Reserve tightening financial conditions.
According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 2.9% in the fourth quarter, following a 3.2% increase in the third quarter. In 2022, real GDP contracted in the first half and then rebounded. For the full year, real GDP increased 2.1% in 2022, down from a 5.9% increase in 2021 and slightly better than NAHB’s forecast of 1.9%.
The deceleration in real GDP in the fourth quarter mainly reflected a downturn in exports and decelerations in nonresidential fixed investment, state and local government spending and consumer spending.
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