02-02-2022, 10:45 AM
- The U.S. economy last year grew at its fastest pace since 1984, but that momentum isn’t carrying into 2022.
- An inventory build fueled most of the second-half growth that put annualized GDP up 5.7% for the year.
- In the first quarter, the economy may not show any gain at all and possibly show a loss in GDP.
- The pandemic, along with declining help from fiscal and monetary policy, will keep growth in check.
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Spurred by a massive inventory rebuild and consumers flush with cash, the U.S. economy last year grew at its fastest pace since 1984.
Don’t expect a repeat performance in 2022.
In fact, the year is starting with little growth signs at all as the late-year spread of omicron coupled with the ebbing tailwind of fiscal stimulus has economists across Wall Street knocking down their forecasts for gross domestic product.
Combine that with a Federal Reserve that has pivoted from the easiest policy in its history to hawkish inflation-fighters, and the picture has suddenly changed substantially. The Atlanta Fed’s GDPNow gauge is currently tracking a first-quarter GDP gain of just 0.1%.
“The economy is decelerating and downshifting,” said Joseph LaVorgna, chief economist for the Americas at Natixis and former chief economist for the National Economic Council under then-President Donald Trump. “It’s not a recession, but it will be if the Fed tries to get too aggressive.”
GDP surged at an impressive 6.9% in the fourth quarter of 2021 to close out a year in which the measure of all goods and services produced in the U.S. increased 5.7% on an annualized basis. That came after a pandemic-induced 3.4% decline in 2020, a year that saw the steepest but shortest recession in U.S. history.
But the path ahead is less certain.
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