The U.S. economy grew at a better than expected pace in the last quarter of the year, though the omicron spread may have slowed it down.
The Commerce Department reported Thursday that gross domestic product increased at a 6.9% annual rate during the October-December period. The economists were looking for a gain of 5.5%. The third quarter growth was unrevised.
Gains came from increases in private inventory assessment, strong consumer activity, exports and business spending as measured by nonresidential fixed investment.
The pace of government spending subtracted from GDP decreased across the board, as did imports.
The quarter ended with a 5.7% increase in GDP, the strongest pace since 1984 as the U.S. tried to pull away from the drop in activity during the early days of the Covid epidemic.
The news was positive for the markets, with stock futures posting gains.
The number of people who applied for unemployment benefits for the week ended January 22 was 260,000, slightly less than the 265,000 estimate and a decline of 30,000 from the previous week.
The decline in orders for long- lasting goods was worse than the estimate. Orders for durables fell to their lowest point since April 2020 as the year came to a close. The decline was caused by a decline in transportation orders.
The GDP report showed a solid period for the economy after output slowed over the summer. Supply chain issues tied to the Pandemic and robust demand spurred by Congress and the Federal Reserve led to imbalances across the economic spectrum.
Consumer activity, which accounts for more than two-thirds of GDP, rose in the third quarter. The jump in gross private domestic investment was 32%.
In the second half of the year, inflation went up as supply couldn't keep up with demand.
The U.S. is on uncertain footing, with the Fed Chairman warning that growth in the early part of the year is slowing, though he sees the economy as strong.
The Fed telegraphed a rate hike in March. The central bankers expect to end their monthly asset purchases in the same month.
Inflation is running at its highest level in nearly 40 years. The personal consumption expenditures price index is the preferred inflation gauge by the Fed.
The price index for gross domestic purchases was up 6.9% in the fourth quarter and 3.9% for the full year. The Fed considers 2% a health level for inflation, though a new policy approach adopted in 2020 allows for higher levels over a short period of time in the interest of generating full employment
Powell said Wednesday that Fed officials believe they have accomplished both ends of their mandate and are ready to start raising rates.
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