Growth in food and beverages purchases kept pace with a solid uptick in U.S. real gross domestic product (GDP) for the 2022 fourth quarter.
U.S. real GDP rose 2.9% year over year to $26.13 trillion in the fourth quarter, the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) reported in advanced estimates released Thursday. For 2022, real GDP climbed 2.1% to $25.46 trillion. That compared with gains of 6.9% for Q4 2021 and 5.7% overall for 2021.
Personal consumption expenditures (PCE), or consumer spending, grew 2.1% in Q4 2022 to $17.77 trillion, accounting for 68% of total GDP in the quarter. However, consumer spending for the year came in at $17.36 trillion, up 2.8% from 2021 and represent 68.2% of overall GDP. The 2022 PCE numbers compared with 2021 growth of 3.3% for Q4 and 7.9% for the full year.
On a sequential basis, the 2.9% gain in Q4 GDP fell short of 3.2% growth in Q3 but kept GDP in the black versus decreases of 0.6% in Q2 and 1.6% in Q1. The trend was similar for consumer spending, as the Q4 uptick of 2.1% was down from 2.3% in Q3 yet well above increases of 2% in Q2 and 1.3% in Q1.
“The increase in real GDP primarily reflected increases in private inventory investment, exports, personal consumption expenditures (PCE), and nonresidential fixed investment that were partly offset by decreases in both federal and state and local government spending,” the BEA stated in its GDP report.
The U.S. GDP results topped 2022 estimates by New York-based business think tank The Conference Board, which had projected growth of 1.9% in Q4 and 2% for the year.
“U.S. real gross domestic product rose by 2.9% (annualized) during the fourth quarter of 2022, exceeding the consensus forecast of 2.6% [from Bloomberg] and The Conference Board’s forecast,” Erik Lundh, a principal economist at The Conference Board, wrote in his Q4 GDP report. “While many components expanded for the quarter, they also showed softening. We continue to expect the U.S. economy to slip into recession in early 2023.”
Food and beverage purchases (for off-premises consumption) increased 2.8% to $1.31 trillion in Q4 2022 and 3.5% to $1.28 trillion for the full year. Sequentially, the Q4 food-and-beverage performance marked a rebound from a 7.6% year-over-year decline in the third quarter.
Of overall consumer spending in 2022, purchases of goods advanced 1.1% in Q4 but dipped 0.4% for the full year, whereas purchases of services were up 2.6% and 4.5%, respectively. Still, goods purchases in Q4 rebounded from a 0.4% decline in Q3, and services growth for Q4 tailed off from 3.7% in Q3.
“Demand for goods grew by 1.1%, while demand for services grew by 2.6%, reflecting an ongoing shift in consumer spending patterns,” The Conference Board’s Lundh noted. “Given what we know about PCE in October and November, however, these GDP data imply that December PCE growth was quite weak.”
The latest U.S. GDP report also exceeded expectations by the National Retail Federation (NRF).
“2022 was real surprising in many ways,” Chief Economist Jack Kleinhenz said in a panel discussion earlier this month at the NRF Retail’s Big Show convention in Manhattan. “The first and second quarters were negative, but we came in with surprisingly good performance in the third. And I expect a reasonable performance for the fourth quarter.”
Kleinhenz described the current economic picture as a “jigsaw puzzle.” The housing market has soured, small businesses remain wary, the manufacturing sector has contracted, inflation has stayed high but relaxed, and the Federal Reserve has lifted interest rates, he explained, yet retail sales have been solid, consumer spending and confidence have held up, and the unemployment rate remains low.
“No matter what the scenario is, it will be a challenging 2023. I do expect a meaningful slowdown. I am still constructive about the consumer. There remains a significant amount of cash out there in checking accounts,” Kleinhenz said at the event. “But, ultimately, my view is that we’re not in recession at this point. I just have to wait and see.”