US economy grows at fastest pace in decades

The US economy grew at its fastest rate in decades last year.

The Commerce Department's figures show that the economy grew by 5.7%.

Analysts are expecting growth to slow this year as the government scales back spending and the Federal Reserve raises interest rates.

High inflation and threats from new Covid variants are some of the risks.

The US economy will grow by 3.7% this year, according to the World Bank.

Andrew Hunter, senior US economist at Capital Economics, said that the Omicron wave means that the economy is starting 2022, on a much weaker footing.

The rebound from 2020 was powered by consumer spending and government spending.

The labour market has regained 19 million of the 22 million jobs that were lost.

In the final three months of the year, output grew at a better than expected rate.

President Joe Biden hailed the figures, saying they were not an accident but driven by the government's recovery efforts.

He urged Congress to move forward with additional spending plans focused on areas such as renewable energy, manufacturing and child care.

The economy is likely to have to perform without that boost, and with less help from the central bank.

The economy no longer needs extra-low borrowing costs put in place in 2020 to help it along, Federal Reserve chair Powell said on Wednesday.

The defining challenge for the economy in the next year or two will be how well we can sustain growth in the face of tighter monetary policy, according to a research note.

The US sees prices rise at their fastest rate in nearly 40 years, and the Fed is under pressure to tackle inflation.

The world has moved past supply chain problems caused by the virus, which has proved to be far more difficult than bank officials thought.

Some analysts think the Fed has moved too slowly to respond to the issue, while others think the bank will move too aggressively, and the higher borrowing costs will reduce demand.

The US stock markets have fallen for three weeks in a row, as well as more recent data suggesting a slowdown as Omicron hit at the end of December and January.

Richard Flynn, managing director at Charles Schwab UK, said that the figures measure GDP up until the end of December.

There has been weakness in the US stock market in the first weeks of 2022, as investors digest some of the risks facing the economy: a rise in inflationary pressures, and a decline in monetary and fiscal liquidity.