The US economy grew strongly in the fourth quarter, according to the government, but momentum has slowed significantly as a result of a surge in COVID-19 infections at the start of the year, clogged supply chains, and soaring inflation.
According to the Commerce Department’s third estimate of fourth-quarter GDP growth, GDP increased at a 6.9 percent annualised rate. This was revised down slightly from the February estimate of 7.0 percent.
In the third quarter, the economy grew at a 2.3 percent annual rate. Growth is now 3.1 percent higher than it was before the pandemic. Reuters polled economists, who expected GDP growth to be revised up to 7.1 percent. The fourth-quarter GDP reading was revised downward due to lower consumer spending and export growth.
After the government provided nearly $6 trillion in pandemic relief, the economy grew 5.7 percent in 2021, the fastest rate since 1984. It shrank by 3.4 percent in 2020, the most in 74 years.
That, however, is all in the past. Early in the year, an onslaught of coronavirus infections contributed to a reduction in spending as well as disruptions in activity at factories and service businesses. While infections have decreased dramatically, allowing for the relaxation of restrictions across the country, inflation is skyrocketing as supply chains remain overstressed.
The Federal Reserve raised its policy interest rate by 25 basis points this month, the first increase in more than three years, signalling an aggressive stance that has the bond market fearful of a future recession. On Tuesday, the widely followed 2-year/10-year Treasury note briefly inverted for the first time since September 2019.