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GDP Growth Surpassed Expectations Despite Omicron

GDP Growth Surpassed Expectations Despite Omicron

Kaithleen Pesantez,

GDP Main Talking Points:

  • GDP increased to an annual rate of 6.9% in Q4 of 2021
  • GDP accelerates after reporting only 2.3% in Q3 of 2021
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Economic Calendar

Gross Domestic Product (GDP)

grew at a 6.9% through the last quarter of 2021 which came in way above median forecasts of 5.5%. It also showed accelerated growth from the third quarter at 2.3%. The latest numbers reflect resilience to the Omicron wave, which was held back last year as we saw virus cases higher than ever before. The main GDP drivers were accelerations from inventory investment and consumer spending which has given optimism that growth will remain throughout 2022.

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GDP Contributors:

Consumer spending rose 2.25% in Q4 which reflected an increase in services led by healthcare, recreation, and transport. Change in private inventories also added 4.9% to GDP led by increases in retail and wholesale. Fixed inventories contributed 0.25% with an increase in business investments primarily reflected a rise in intellectual property products but was partly offset by a decrease in structures. Lastly, government spending declined and subtracted -0.51% from the bottom-line GDP.

U.S. Recovery

Economy is expected to slow and many economists have been downgrading their forecasts for Q1 of 2022 to reflect the COVID-19 impact given that restaurants, hotels, and entertainment remains under pressure from Omicron. Consumer spending may be futher heldback especially with inflation expectations and we saw retail sales fall by 1.9% in December and manufacturing also slowed. Overall International Monetary Fund (IMF) has forecasted that the nations GDP growth will slow to 4% in 2022.

--- Written by Kaithleen Pesantez, Market Strategist for DailyFX.com

Contact and follow Kaithleen on Twitter: @ktpesantez

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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