Last year, the US economy grew at its quickest rate in decades as it recovered from pandemic lockdowns.
The economy increased at its fastest rate since 1984, according to official statistics from the Commerce Department.
However, as the government reduces stimulus spending and the Federal Reserve rises interest rates, economists predict GDP to weaken this year.
High inflation and threats from new Covid versions like Omicron are among the other dangers.
According to the World Bank, the US economy will increase by 3.7 percent this year, which is in line with other estimates.
“The Omicron wave implies the economy is off to a considerably poorer start in 2022, and we anticipate growth to underperform for the remainder of this year as well,” said Andrew Hunter, senior US economist at Capital Economics.
Consumer spending and government support aided the recovery from 2020, when the epidemic caused the economy to shrink by 3.4 percent.
The labor market has now recovered 19 million of the 22 million jobs that were lost during the shutdowns that year.
The economy remained strong in the final three months of the year, growing at a faster-than-expected annual rate of 6.9%.
President Joe Biden praised the results, saying they were “not by chance,” but rather the result of the government’s efforts to recover.
He asked Congress to press through with further spending initiatives centered on renewable energy, manufacturing, and child care as the current stimulus program draws to a close.
However, because Mr Biden’s program is presently stuck in Congress, the economy will have to function without that boost – and with less aid from the Federal Reserve.
On Wednesday, Federal Reserve Chairman Jerome Powell hinted that the central bank will increase its benchmark interest rate in March for the first time since 2018, claiming that the economy no longer need the extra-low borrowing rates imposed in 2020 to help it grow.
In a research note, Wells Fargo analysts said, “The defining issue for the economy in the next year or two will be how effectively we can maintain growth not just in the absence of fiscal intervention, but in the face of tighter monetary policy.”
As prices in the United States grow at their quickest rate in over 40 years, the Fed is under pressure to act.
Officials from the Globe Bank had predicted that the pressures will pass as the world got through supply chain issues caused by the virus, but this has proven to be significantly more difficult than expected.
Some economists believe the Fed has already acted too slowly in response to the problem, while others believe the bank will act too forcefully, reducing demand more than predicted.
As a result of the fears, US stock markets have dropped for three weeks in a row, with more recent data showing a slowdown similar to what Omicron experienced in December and January.
“Today’s statistics cover GDP to the end of December 2021, omitting some of the recent Covid-19 spikes,” said Richard Flynn, managing director of Charles Schwab UK.
“Indeed, there has been weakening across US market indexes in the opening weeks of 2022, as investors analyze some of the concerns confronting the economy: decreasing monetary and fiscal liquidity, the pandemic’s long-term repercussions, and rising inflationary pressures.”