According to the Bureau of Economic Analysis (BEA), the economy grew by 2.9% last year as a whole. This is a first estimate but will need to be reviewed in the coming months as data settles.
The data confirms the economy is cooling off, as consumers have moderated their consumption, in part because of inflation's dent in their income and also because of the increase in interest rates, which has a direct impact on the income of those who have some type of debt.
Income, consumption, and savings
Consumption continues to grow but at a slower pace. The official note from the BEA states:
The increase in consumer spending reflected increases in both services and goods. Within services, the increase was led by health care, housing and utilities, and "other" services (notably, personal care services). Within goods, the leading contributor was motor vehicles and parts.
In the last quarter, personal disposable income grew by 3.3% in real terms (in annualized terms), compared to 1.1% in the third quarter. On the other hand, the savings rate improved slightly: from 2.7% from July to September to 2.9% in the last three months of the year.
Cooling off in 2023
The shadow of recession looms over the U.S. economy. Inflation is receding, but slowly. Interest rates will be high, at least throughout 2023. On the other hand, forecasts estimate the world economy will cool off in the current year.
The United Nations (UN) reduced its forecast for world economic growth to 1.9% for 2023 after its last estimate of 3%. The World Bank cut its growth forecast almost in half earlier this year, from a projection of 3% to just 1.7%. On the other hand, the International Monetary Fund (IMF) projected in October that global growth would slow from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023.