US growth likely slowed last quarter but still resilient

Washington: The nation’s economy was supposed to have sunk into recession by now, dragged down by the highest interest rates in two decades and a resulting slump in borrowing and spending.

Instead, the US economy has kept chugging along. Even more encouraging, inflation, which touched a four-decade high in 2022, has edged steadily lower without the painful layoffs that most economists had thought would be necessary to slow the acceleration of prices. On Thursday, the Commerce Department is expected to report that the nation’s gross domestic product — the economy’s total output of goods and services — rose at an annual rate of around 2 per cent from October through December. That would mark a deceleration from a vigorous 4.9 per cent growth rate in the July-September quarter. But it would still showcase the surprising durability of the world’s largest economy, marking the sixth straight quarter in which GDP has expanded at a solid annual pace of 2 per cent or more. Helping fuel that growth has been steady spending by consumers, whose purchases drive more than two-thirds of the economy. The economy’s outlook had looked far bleaker a year ago. As recently as April 2023, an economic model published by the Conference Board, a business group, had pegged the likelihood of a US recession over the next 12 months at close to 99 per cent. The widespread fear was that the Federal Reserve’s numerous interest hikes, in seeking to tame inflation, would slow borrowing and spending so much as to trigger a deep downturn. That is what typically has occurred when the nation’s central bank has aggressively jacked up rates to fight inflation.