US: GDP surprised to the upside in Q4 – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest US GDP figures during the October-December period.

Key Takeaways

“The advance estimate of the 4Q 2022 GDP surprised on the upside with a 2.9% q/q SAAR expansion (versus Bloomberg est +2.6%), from an unchanged 3.2% in 3Q. Compared to one year ago, the US GDP grew by +1.0% y/y in 4Q, easing from 1.9% in 3Q. For the full year, US GDP grew by 2.1% in 2022, from 5.9% in 2021.”

“The 2.9% expansion in 4Q was due to the volatile private inventories which contributed to half of the gain while government spending rose the fastest pace since 1Q 2021. While private consumption expenditure (PCE) rose in 4Q, it came in below expectations and together with the disappointment from the inflation adjusted sales to private domestic buyers, raised concerns about US consumer, under the weight of an elevated inflation environment. Non-residential fixed investment (business spending) also rose at a much slower pace in 4Q while net exports contributed mainly due to weak imports, which again pointed to concerns about US domestic demand.”

“US GDP Outlook - For 2023, we continue to expect the US economy to fall into a shallow recession due to the combination of elevated inflation, aggressive Fed rate hikes and global growth slowdown with a European recession. We keep our projection for US GDP to contract by 0.5% in 2023. The US labor market remains incredibly resilient and we do not expect the US to fall into a deeper recession unless we get a more protracted and sharper Fed tightening cycle.”