The fourth-quarter growth rate was below the 3.2% real GDP gain recorded in the third quarter. In the second quarter, real GDP decreased 0.6%, after contracting 1.6% in the first quarter.
The real GDP figure for the fourth quarter "reflected increases in private inventory investment, consumer spending, federal government spending, state and local government spending, and non-residential fixed investment that were partly offset by decreases in residential fixed investment and exports," the BEA said in the release.
Moreover, the deceleration from the third-quarter figure, "primarily reflected a downturn in exports and decelerations in non-residential fixed investment, state and local government spending, and consumer spending," the BEA added.
For all of 2022, real GDP increased 2.1% in 2022, compared with an increase of 5.9% in 2021.
Vanguard Group's investment strategy group said in a statement that "solid GDP growth of 2.9% alongside a still-strong labor market will keep rate-hike pressure on the Federal Reserve."
Vanguard had $7.2 trillion in assets under management as of Dec. 31.
Brian Mulberry, client portfolio manager at Zacks Investment Management, said in an email that while GDP data coming in better than expected is certainly good economic news, "recently we have seen the stock market move down on strengthening news."
It is like a game of chicken over interest rates, Mr. Mulberry said, as the market is pricing in lower interest rates by year-end on the bet that the economy slows to the point that the Federal Reserve must pivot and lower interest rates to provide stability.
"A growing economy means that rates will need to go higher than markets expect and stay there for longer than expected as well," he noted.
Mr. Mulberry added that his view is that with this kind of strength in the labor markets, "we could see continued strength in spending from consumers but this also tends to keep prices higher."
Zacks has $15 billion in AUM.
As of noon EST on Thursday, Fed futures trading on the Chicago Mercantile Exchange were priced at 99.1% probability (a virtual guarantee) the central bank will hike rates by 25 basis points to a range of between 4.5% and 4.75% when it releases its next monetary policy statement Feb. 1.