Economy grew 2.9% in quarter despite hurdles

But most economists expect at least mild recession by midyear.

The U.S. economy expanded at a 2.9% annual pace from October through December, ending 2022 with momentum despite the pressure of high interest rates and widespread fears of a looming recession.

Thursday’s estimate from the Commerce Department showed that the nation’s gross domestic product — the broadest gauge of economic output — decelerated last quarter from the 3.2% annual growth rate it had posted from July through September. Most economists think the economy will slow further in the current quarter and slide into at least a mild recession by midyear.

The economy got a boost last quarter from resilient consumer spending and restocking of supplies by businesses. Federal government spending also helped lift GDP. But with higher mortgage rates under- cutting residential real estate, investment in housing plummeted at a 27% annual rate for a second straight quarter.

For a ll of 2022, G DP expanded 2.1% after grow- ing 5.9% in 2021.

The economy’s expected slowdown in the months ahead is an intended consequence of the Federal Reserve’s aggres- sive series of rate increases. The Fed’s hikes are meant to reduce growth, cool spend- ing and crush the worst inflation bout in four decades. Last year, the Fed raised its bench- mark rate seven times. It is set to do so again next week, though this time by a smaller amount.

The resilience of the U.S. job market has been a major surprise. Last year, employers added 4.5 million jobs, second only to the 6.7 million that were added in 2021 in government records going back to 1940. And last month’s unemployment rate, 3.5%, matched a 53-year low.

But the good times for America’s workers aren’t likely to last. As higher rates make borrowing and spending increasingly expensive across the economy, many consumers will spend less, and employers will likely hire less.