US economy firing on all cylinders

<p>Kia ora,</p><p>Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news financial market reactions to yesterday's Fed announcements are still echoing around the world.</p><p>But first up today, and confirming the strong data we have been reporting for months, <a href="https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-advance-estimate" target="_blank"><strong>the first estimate of economic activity</strong></a> in the December quarter in the US has come in unusually strong, in fact the best result in nearly 40 years. GDP rose +1.7% in December from September which is an annualised rate of +6.9%. For the full 2021 it was up +5.7%. These are 'real' increases, discounting inflation. But the nominal rise takes the US economy to <a href="https://fred.stlouisfed.org/series/GDP" target="_blank"><strong>a US$24 tln behemoth</strong></a> - and supercharged by a strong exchange rate. By any measure, today’s Q4 result is impressive, although it is not final - two more revisions will come over the next month or so.</p><p>This GDP data also gave us our first look at December PCE data, the inflation measure the Fed is said to prefer. They have an inflation problem with that up +6.5% and core PCE up +4.9%.</p><p>Financial markets are seeing a Fed that seems determined now to fight inflation, a jot that is harder because they are late to the effort. And that may bring a bumpy road.</p><p>It could be especially bumpy for tech stocks. The latest to slip out of favour is <a href="https://www.nasdaq.com/market-activity/stocks/tsla" target="_blank"><strong>Tesla</strong></a>, which is down an eye-watering -28% since the start of the year, including today's -8% dumping.</p><p>Meanwhile, <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20220144.pdf" target="_blank"><strong>initial jobless claims</strong></a>