Gross domestic product grew at an annualized rate of 6.9%, the Commerce Department said in its third estimate of fourth-quarter GDP growth.
The U.S. economy enjoyed robust growth in the fourth quarter, the government confirmed on Wednesday, but momentum slowed significantly amid a surge in COVID-19 infections earlier this year, supply chains tightened and runaway inflation.
Gross domestic product grew at an annualized rate of 6.9%, the Commerce Department said in its third estimate of fourth-quarter GDP growth. This was revised down slightly from the 7.0% pace estimated in February.
The economy grew at a rate of 2.3% in the third quarter. Growth is 3.1% higher than its pre-pandemic level. Economists polled by Reuters had expected GDP growth to be revised to 7.1%. The revision to the fourth-quarter GDP reading reflected downward revisions to consumer spending and export growth.
For all of 2021, the economy grew 5.7%, the strongest since 1984, after the government provided nearly $6 trillion in pandemic relief. It contracted 3.4% in 2020, the biggest drop in 74 years.
But it’s all in the rearview mirror. A wave of coronavirus infections helped curb spending as well as disrupt activity at factories and service businesses earlier this year. While infections have dropped dramatically, prompting the rollback of restrictions across the country, inflation is soaring as supply chains remain strained.
The Federal Reserve this month raised its benchmark rate by 25 basis points, the first hike in more than three years, and signaled an aggressive stance that left the bond market fearing a recession down the road. The widely followed US 2-year/10-year Treasury briefly reversed on Tuesday for the first time since September 2019.
But economists said the Fed’s massive holdings of Treasuries and mortgage-backed securities made it difficult to read yield curve movements clearly.
“This is likely putting further downward pressure on long-term rates, and it may not be until the balance sheet reduction begins, probably in June, that we will have a better idea of the extent. distortion of long-term returns,” he added. said Andrew Hollenhorst, chief US economist at Citigroup in New York.
Economists expect the expansion to continue, with a tightening labor market and massive savings protecting households against high inflation.
Corporate profit growth slowed significantly in the fourth quarter as domestic financial companies suffered a decline. There were also moderate increases in profits for domestic non-financial corporations and the rest of the world.
Corporate profits with inventory valuation and capital consumption adjustments rose at a $20.4 billion rate in the fourth quarter after growing at a $96.9 billion pace in the third quarter.