US fourth-quarter GDP revised lower on weaker consumer spending

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US economic growth in the fourth quarter was weaker than previously estimated, reflecting a downward revision to consumer spending.

Inflation-adjusted gross domestic product, or the total value of all goods and services produced in the US, increased at a 2.7% annualized rate during the period, Commerce Department data showed Thursday. The figure compares with a previously reported 2.9% advance.

The details of the report point to an economy that was losing steam at the end of 2022. Stripping out trade, government spending, and inventories, a key gauge of underlying demand known as inflation-adjusted final sales to private domestic purchasers rose just 0.1%, the weakest since the start of the pandemic.

Household expenditures increased an annualized 1.4% in the final three months of 2022, driven by a third-straight quarter of decline in spending on durable goods such as motor vehicles. Consumer spending was previously estimated as rising by 2.1%.

While the rapid slowdown in personal spending in particular spurred concerns about the health of American consumers, it also bolstered hopes that the economy was slowing in a way that could be consistent with a so-called soft landing.

Recent figures, however, point to a rebound in consumer spending at the start of 2023 and a startlingly strong job market highlighted by the lowest unemployment rate in more than 53 years.

Solid hiring against a backdrop of limited labour supply has driven up wage costs for companies and risks keeping inflation elevated. While the Federal Reserve has aggressively boosted interest rates to cool price pressures, raising the risk of recession, healthy employment growth is a big tailwind for the economy.