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Jan. 26 (UPI) -- The U.S. economy, the world's largest, expanded during the fourth quarter against inflationary pressures, but the pace of growth was slower than the previous quarter, federal data published Thursday show. The Commerce Department reported gross domestic product increased at an annual rate of 2.9% during the fourth quarter, a slowdown from the 3.2% expansion recorded during the three-month period ending in September.
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The government attributed the decline to a slump in exports and lower spending in general, both at the consumer and at the state and local government level.
"These movements were partly offset by an upturn in private inventory investment, an acceleration in federal government spending, and a smaller decrease in residential fixed investment," the report from the Commerce Department read.
The U.S. Federal Reserve spent much of last year trying to arrest consumer level inflation with aggressive rate hikes that were widely expected to at the very least curb hiring, if not slow things down enough to usher in a recession.
A formal recession would see a steady decline in economic activity across sequential financial quarters, coupled with an increase in the unemployment rate. Positive GDP readings suggest the U.S. economy might escape a recession, though mounting job losses in the tech sector could be a sign of looming dangers.
Even still, consumers seem to be faring well. Disposable income increased by 6.5% from the third quarter to reach $297 billion, compared with a 5.4% increase over the previous term.
Personal savings, meanwhile, improved by $507.7 billion in the third quarter to $552.9 billion.
In the latest Beige Book, a summary of economic conditions across the 12 Federal Reserve Districts, contacts told the Federal Reserve that they expected sluggish growth in the coming months. Consumer spending is holding up, though retailers are reporting lingering inflationary strains.
Supply-chain disruptions are still common in the manufacturing sector and the housing market remains weak. The latter, however, has seen modest improvement in response to lower lending rates, though it remains something of a seller's market.
The Fed is widely expected to continue hiking rates, but not as steep as the increase of 75 basis points, or 0.75%, that prevailed through 2022. If the 25 basis point increase from Canada's central bank is any indication, the Fed could show signs of relaxing when it meets next on Feb. 1
Markets were upbeat on the latest GDP reading. The Dow Jones Industrial Average was up about 0.5%, the S&P 500 was up 0.7% and the tech-heavy Nasdaq was up some 1.3% as of 9:40 a.m. EST.
