Home > US GDP grew 6.9% in Q4 to outpace estimates, stocks open higher

US GDP grew 6.9% in Q4 to outpace estimates, stocks open higher

  • The economy’s growth rate of 6.9% over the fourth quarter was better than the expected 5.5% and higher than the 2.3% pace seen over Q3.

  • US stocks opened higher, with the S&P 500, the Nasdaq composite, and the Dow all up more than 1% in early trades.

Gross domestic product (GDP) data released by the Bureau of Economic Analysis (BEA) on Thursday showed that the economy accelerated in the fourth quarter, with the growth recorded despite concerns around the Covid-19 Omicron variant.

The economic data indicates that the US economy grew at annualised rate of 6.9% in the fourth quarter of 2021, outpacing analyst estimates of 5.5%.

 GDP growth over the three months of October to the end of December was also much higher than expected when compared to the pace seen in the third quarter. The Q3's unrevised figures showed the economy expanded at an annualised rate of 2.3%, the slowest rate GDP had risen since Q2 2020.

According to the details released by the Commerce Department, the upward impulse was triggered from sectors such as personal consumption, business spending, private inventory assessment, and exports.

For example, while consumer spending in the quarter grew at 3.3% versus the 3.4% expected, it significantly outpaced the 2.0% growth witnessed in Q3.  Core personal consumption expenditures increased 4.9% quarter-over-quarter against 4.9% expected. However, it was better than the 4.6% recorded for the third quarter.

Overall, the US economy over 2021 grew at annualised rate of 5.7%, the fastest it’s been at 1984. In 2020, the economy grew at a negative 3.4%.

The report comes out at a time the US Federal Reserve is eyeing a first interest rate hike for 2022, which is expected on the back of rising inflation that hit a near 40-year high last year.

On Wednesday, Fed Chair Jerome Powell said he expected the economy to slow down at least for the first few months of the year. However, he expressed the belief that the US economy was largely in a strong position.

The market reaction to the GDP news has been positive, with Wall Street opening higher on Thursday.

The S&P 500 is 1.73% up, while the Nasdaq Composite and the Dow Jones Industrial are also trading higher in early morning deals, up 1.57% and 1.65% respectively.

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