The latest U.S. GDP figure showed slower growth, but a slower pace of slowdown than anticipated. The U.S. saw 2.9% growth in 4Q, down from 3.2% in Q3, yet still surpassing the projected 2.6%. After contracting 1.1% in H1, the recent growth is a positive sign. Recent data highlights the impact of interest rate hikes on consumer spending, for example, retail sales dropped in December as consumers reduced spending on items accumulated during the pandemic like furniture and electronics.
In January, US business activity contracted for 7 consecutive months, but with a slower rate of decline in both manufacturing and services sectors, and an improvement in business confidence. The services PMI is concerned with the accelerating input cost inflation, despite the economic contraction, due to rising wages, which could prompt the Fed to maintain their aggressive policy and affect markets.