And if they started talking about the economy, then on the eve of the Fed meeting, it is necessary to recall the key indicator that was published on Thursday - US GDP in Q4 (i.e. changes in GDP by Q3).
What do we have?
As usual, the new publications have by no means added clarity to the understanding of the situation.
💠 On the one hand, the data came out better than the forecast. Fact amounted 2,9% against expected 2,6%, on the other hand, is worse than the previous 3,2% for the 3rd quarter.
💠 On the one hand, the preliminary growth of US GDP in 2022 amounted to an increase of about 2.1%, which is significantly less than 5.9% in 2021. But on the other hand, in the prosperous 2015-2019, the average GDP growth rate was 2.3%.
💠 The current 2.1% is definitely not a recession. Moreover, the failure of 2020 (at -2.8%) was fully offset by growth of 5.9% in 2021, so even against the backdrop of a high base of comparison (2021) and record inflation, current GDP values are a very worthy result.
💠An analysis of the factors that shaped the current dynamics speaks, firstly, of the complete exit of the United States in the 4th quarter from covid restrictions, and secondly, how surprisingly, consumption was stimulated by ... an increase in interest rates🤷.
This phenomenon is worth explaining.🐟.
As in previous years, the backbone of the US economy is private consumption. Growth rates of durable goods increased in Q4 for a record 5.6%. This is the maximum figure from the blessed 4 quarters 2017 of the year and although there is certainly a seasonal factor here (black Fridays, Christmas and other annual sales), all the same, in the current conditions of really high interest rates on loans, such a five-year maximum is hard to explain by anything other than ... the expectation of price increases and higher interest rates.💁 ♂️
It's just that the expectation channel has kicked in here, with consumers rushing to shop at a lower price and stake out a lower percentage for themselves.
Most likely, this is a short-term surge, and already in the first quarter of 2023 we can see reducing this effect, but then in benefit of economic growth will play a reduction in inflation.
In general, this is the case when even an extremely careful study of the Fed's press release may not provide enough information for a complete understanding of the immediate prospects and the situation as a whole. 👨🎓
Summary. The results of the US economy in 2022 cannot be called such that they clearly indicate a recession. 🤷♂️
Even with extremely high inflation, GDP growth rates are quite consistent with the average annual indicators of the pre-COVID period.
In addition, an increase in the interest rate meets the principles of economic theory 👨🎓 and, in general, it has an expected effect on the economy: an increase in the rate - a decrease in lending - a correction in expectations.
And How the result is an unexpected support for GDP at the end of the year.
Author: Novel in macroeconomics
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