Tag:
0

US GDP Growth Slower than Expected

Intelligent Economics > Analysis > US GDP Growth Slower than Expected

The United States’ GDP release for the last quarter of 2021 came in higher than expected. Even with the spread of the Omicron variant of COVID, real GDP increased by 1.7% compared to the previous quarter and is 5.5% higher than in the last quarter of 2020. With year over year inflation currently at 7.2%, the rest of this analysis will use inflation adjusted totals in order to get a clearer view of the US economy.

By looking at goods and services separately, we can better understand what drove this growth. Consumption of goods increased by just 0.12% compared to Q3. A decrease in car sales was offset by an increase in sales for other recreational goods. The total for services increased by 1.2%, with the largest increase within this category happening in health care, which increase by $40 billion (1.8%).

Real gross private domestic investment contributed the most to this quarterly increase in GDP, with an increase in investment of $259 billion (7%). While GDP growth was low compared to the previous large increase seen in the third quarter of 2021, real GDP is now 3.1% higher than it was at the end of 2019.

Whether there will be sustained real growth in 2022 will depend on how future COVID contagions are managed and what measures are taken to curtail inflation.

 With the Federal Reserve currently implementing the first of what are planned to be 4 interest rate hikes in 2022, this could slow down growth. Even if nominal GDP grows rapidly, it will still have to outpace inflation that could increase further if interest rate increases are not enough to offset the effect of supply chain disruptions and increasing wages.

Related Posts

Leave a Reply