Will US growth slow in the last quarter of 2022?

How did the US economy perform in the last quarter of 2022?

The US economy is expected to expand in the fourth quarter, albeit at a slower pace than it did earlier in the year, as the Fed’s aggressive rate hike campaign boosts growth.

The Bureau of Economic Analysis is expected to report Thursday that US gross domestic product grew 2.6 percent in the three months to December 31, according to a Bloomberg survey of economists. That would represent a downward shift from the 3.2 percent rate in the third quarter.

The housing sector likely contributed to the slowdown, argue City analysts Veronica Clark and Andrew Hollenhorst. They say the decline in housing investment likely “significantly” affected fourth-quarter GDP, which is already evident in data such as housing starts and building permits. With the Federal Reserve raising interest rates and, in turn, mortgage rates, the housing sector slowed, with new home construction falling in December for the fourth straight month, marking the first annual decline since 2009.

The PCE price index will also be included in the GDP release, which reflects changes in the prices of goods and services. This data is expected to show an increase of 1.7 percent, down from 2.3 percent in the previous quarter. Kate Duguid

Will confidence in the European economic outlook rise?

The first economic indicators for the Eurozone and the UK in 2023 are expected to show signs among businesses that the contraction in Europe will be more moderate than previously expected.

The closely watched S&P Purchasing Managers’ Indexes, a measure of the health of private sector activity, is expected to have risen when preliminary figures for January are published on Tuesday.

Economists polled by Reuters had forecast the eurozone’s composite PMI rose to 49.8 in January from 49.3 the previous month.

The services sector is expected to return to above the 50 mark, which indicates that the majority of companies recorded expansion compared to the previous month. The manufacturing PMI is expected to remain below this limit, but rise to 48.5 in January from 47.8 in December.

“Helped by significant government intervention to limit the damage to consumers and businesses from higher energy prices, activity appears to have held up better than many expected, so much so that winter recession fears have subsided,” said Sandra Horsfield, an economist at Investec. .

While Horsfield is “cautious” about canceling recession in the eurozone, she notes that the marked declines in wholesale energy costs, buoyed by unusually mild weather conditions in late 2022, “may have led to activity picking up further in January,” Although energy costs have been low, they are still at historically high levels.”

Similar improvements are expected for UK PMIs, where the Composite Index is expected to rebound near the 50 mark from 49 in December, thanks in part to government energy subsidy schemes for households and businesses that support demand. Despite the expected improvement, most analysts expect the British economy to be in recession for most of this year. Valentine’s Day in Rome

What will tech earnings reveal about the Fed’s rate-tightening campaign?

The biggest names in the tech sector reported earnings this week as investors are eager to see how the industry has handled soaring inflation and sharp increases in the Federal Reserve’s interest rates in 2022.

“The most growth-oriented sectors, such as technology, have faced the greatest pressure from rising interest rates,” said Moopen Tahir, director of macroeconomic research and tactical solutions at WisdomTree Europe.

The results of Morgan Stanley and Goldman Sachs last week exemplified the difficult environment, as the decrease in merger and acquisition activity, the listing of new stock markets and debt deals led to a massive drop in profits in the banking sector compared to the record levels seen in 2021.

Morgan Stanley’s revenue from its wealth management division last quarter helped it beat analyst estimates of $2.2 billion in net profit, but rival Goldman Sachs’ forecast fell short of $1.3 billion in the same period.

The outlook for technology is set to be evenly divided. Microsoft, which publishes results on Tuesday, saw its share price drop about 28 percent last year, and announced last week that it would cut 10,000 jobs to cut costs.

Shares in Tesla, which releases results on Wednesday, fell 65 percent over the period — despite the fact that its global sales volume rose 40 percent in 2022. Earlier this month, Tesla announced it would cut prices for its electric cars in An effort to support demand during this year’s economic downturn forecast.

“[Large investors] “He gave them money in the hope that some percentage of them would make money, because the money was free,” said Steve Blitz, chief US economist at TS Lombard. “Now that it’s not free anymore, potential unicorns have been ripped off money unless they can show their earning potential.”

FactSet, the data provider, estimates that the US information technology sector experienced a 9.8 percent drop in earnings per share in the fourth quarter compared to the same period last year.

“In the near term, there are still pressures that could translate into a slowdown in earnings, but when we start to see inflation numbers come down and pressure from the central bank tightening easing, we may also see those pressures start to abate,” Taher said. “We are cautiously optimistic that we may weather the storm of policy tightening without a significant impact on earnings.” Martha Muir

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