US economic growth accelerated in the fourth quarter ahead of Omicron
U.S. economic growth accelerated faster than expected in the final quarter of 2021, boosted by consumer spending before disruptions from the Omicron variant of the coronavirus hit.
U.S. gross domestic product rose 6.9% on an annualized basis in the fourth quarter, compared with 2.3% in the third quarter, the Commerce Department said Thursday. That beat economists’ forecast for a 5.5% lead, according to a Reuters poll.
GDP rose 1.7% from the previous quarter, according to a measure used by other major economies.
Despite disappointing retail sales data for December, consumer spending helped support economic growth as Americans shopped early for the holiday amid fears supply chain issues could lead to shelves empty. Personal consumption rose 3.3% in the fourth quarter, after a more modest increase of 2% in the previous quarter.
“The increase in real GDP primarily reflects increased private investment in inventory, exports, personal consumption expenditure and non-residential fixed investment,” the Commerce Department said.
Economists have warned that the wave of Covid-19 infections triggered by Omicron will deal a severe but short-lived blow to economic activity in early 2022. Americans have cut restaurant meals and air travel, while that plans to return workers to their offices were delayed, which affected spending in commercial areas.
The IMF warned this week that the global economic recovery from the pandemic will face multiple obstacles. It cut its forecast for U.S. economic growth this year to 4%, from 5.2% in its October outlook.
Federal Reserve Chairman Jay Powell said on Wednesday he expected some economic downturn from the Omicron wave that began spreading across the United States in late December, but the effects would be temporary. .
The Fed moved past Omicron’s concerns and signaled its intention to raise interest rates in March as it continues its plans to tighten monetary policy and stamp out stubbornly high inflation.
As markets eye four rate hikes and a balance sheet liquidation this year, concerns have grown that aggressive tightening could slow the economy. But James Knightley, chief international economist at ING, said “it could actually boost confidence that they have inflation under control because inflation is a real concern for households and businesses.”