Gross domestic product (GDP) increased by 2.9% annualized in the fourth quarter of 2022, according to the first advance estimate released by the Bureau of Economic Analysis (BEA). That’s continuing growth from the third quarter when GDP rose 3.2% annually, the BEA reported in December.
The increase in real GDP was driven by private inventory investment, consumer spending, government spending and nonresidential fixed investment, the BEA reported. Moreover, Americans’ personal income increased by $311 billion in the fourth quarter. That’s up from an increase of $283.1 billion in the third quarter.
“The big picture view of economic growth in the fourth quarter is a positive one,” Curt Long, NAFCU chief economist and vice president of research, said in a statement. “Much of that growth was concentrated in inventory build, which is unlikely to grow at a similar pace in 2023. Nevertheless, with resilient consumer spending, low unemployment claims, and receding inflation, some of the clouds that were forming over the economy several months ago are beginning to clear.”
Despite positive economic indicators in the latest GDP report, some experts have warned inflation will still hold a tight grip on Americans’ wallets.
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CREDIT CARD DEBT PREVENTS NEARLY 20% OF AMERICANS FROM BECOMING HOMEOWNERS
High inflation, interest rates may persist in 2023
Despite an inflation cool off in recent months, many Americans are still dealing with high prices. In fact, 52% of Americans said inflation has impacted them “a lot,” according to a November poll by YouGovAmerica and The Economist.
Plus, inflation has had a significant impact on retirees, another study said. A majority (83%) of retirees said inflation has impacted their retirement savings and 18% said they’ve even skipped meals to make their money last longer, according to a study by the real-estate data company Clever.
To combat inflation, the Federal Reserve raised interest rates throughout 2022 and is expected to continue doing so in 2023. Most recently, the Fed raised interest rates by 50 basis points in December.
“We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” Fed Chairman Jerome Powell said in a December press conference. “In addition, we are continuing the process of significantly reducing the size of our balance sheet. Restoring price stability will likely require maintaining a restrictive policy stance for some time.”
For consumers, the Fed’s spike in interest rates may reflect on the interest rates for products like credit cards. If you’re struggling with credit card debt, you could consider paying it off with a personal loan at a lower interest rate. Visit Credible to speak with a personal loan expert to see if this option is right for you.
MANY AMERICANS BELIEVE INFLATION WILL GET WORSE IN 2023
Record credit card delinquencies predicted by end of year
To deal with increased spending, many consumers have turned to products like credit cards. Total credit card balances increased by $38 billion between the second and third quarters, marking a 15% year-over-year boost, according to a Federal Reserve Bank of New York report that was published in November.
And in 2023, credit card delinquencies may reach levels not seen since 2010, according to the 2023 Consumer Credit Forecast by TransUnion. The credit reporting company said it expects credit card delinquencies to increase to 2.6% by the end of 2023 from 2.1% at the closing of 2022.
“Consumers are increasingly struggling to navigate the ongoing effects from the spike in prices last year by drawing on credit and savings,” Morning Consult’s Chief Economist John Leer said in a statement. “With consumer demand likely to continue its downward trajectory, business investment is also likely to slow in the coming quarters, increasing the probability of a recession this year.”
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CREDIT CARD DEBT CARRIED OVER MONTHLY IS MOST COMMON TYPE OF DEBT: AARP
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