U.S. Growth At Highest Level Since 1984, But IMF Predicts Slowdown

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Meanwhile, here are the major headlines from the last week:

• The U.S. economy grew 5.7 percent in 2021, the fastest full-year rate since 1984. Growth improved at the end of the year, rising at a 6.9 percent annual rate from October to December, after a 2.3 percent increase in the third quarter. According to Reuters, one reason growth came back at the end of the year was that companies were able to restore inventories that had been depleted by supply-chain disruptions.
• Meanwhile, the International Monetary Fund (IMF) downgraded its forecast for the world economic growth this year, citing the spread of COVID-19, higher energy prices and inflation, and lower growth in China. The IMF now expects the global economy will expand 4.4 percent in 2022, down from last year’s 5.9 percent prediction. The U.S. economy will expand just four percent (down from 5.2 percent), the IMF said, while Canada’s economy will expand by just 3.3 percent, down from an earlier prediction of 4.1 percent. Additionally, the Federal Reserve Bank of Chicago’s National Activity Index, a key indicator of future U.S. growth, fell to -0.15 in December, down from +0.44 in November.
• The Federal Reserve Bank of Kansas City’s manufacturing index rose to +24 last month as readings for new orders, production, and employment improved. The bank said factory growth was driven more by activity at durable goods plants, especially primary metals, machinery, electrical, furniture, and transportation equipment manufacturing. Meanwhile, the Federal Reserve Bank of Richmond said its index for the central Atlantic region fell from +16 in December to +8 in January due to declines in the indexes for new orders and employment. Shipments increased slightly, however.
• Personal consumption expenditures, the Federal Reserve’s preferred gauge of inflation, increased at a 5.8 percent annual rate in December 2021, the fastest pace in 39 years. Personal incomes were up 0.3 percent. Read the full report here.
• According to the U.S. Department of Labor, 260,000 individuals filed for federal unemployment benefits for the first time during the week ending January 22. That number was down 30,000 from the week before. The number of people who continued to receive benefits increased, however. Read the full report here.
• In other economic news: the number of new homes sold in the United States rose 11.9 percent from November 2021 to December 2021, but fell 14 percent from December 2020 to December 2021; auto production in Canada is at its lowest level since 1967; the Conference Board’s reading for U.S. consumer confidence fell slightly at the end of 2021, to 113.8 in November from 115.2 in December while the University of Michigan’s consumer sentiment index fell to 67.2 in January from 70.6 in December.