The U.S. economy grew by 2.9% over October, November, and December of 2022, easing concerns of a pending recession and instilling a new level of faith for the year ahead.

Fourth-quarter gross domestic product, the sum of all goods and services produced for the last months of the year, rose at a 2.9% annualized pace, the Commerce Department reported Thursday.

Economists surveyed by Dow Jones had projected a reading of 2.8%. Still, the 2.9% overall growth was a cool-down from the 3.2% increase seen in the previous quarter, the Bureau of Economic Analysis said Thursday.

Consumer spending, which accounts for roughly 68% of GDP, contributed to the strong fourth-quarter showing, especially given the slumps entrenching large parts of the economy, such as housing and manufacturing.

"The economy continued to motor on," Michael Gapen, chief U.S. economist for Bank of America, told the New York Times. "There's more momentum in the economy at year-end than we thought, and a lot of that is from households."

An increase in federal government spending also contributed to the gains, but it was countered by a fast-cooling housing market, particularly a drop in the construction of single-family homes, and a decrease in exports.

Federal government spending rose 6.2%, stemming from an 11.2% surge in non-defense outlays, while state and local expenditures were up 2.3%. Government spending in total added 0.64 percentage points to GDP.

The personal consumption expenditures price index increased by 3.2%, in line with expectations but down sharply from 4.8% in the third quarter. Excluding food and energy, the chain-weighted index rose 3.9%, down from 4.7%.

Inflation readings moved considerably lower toward the end of 2022, after eclipsing 41-year highs during the summer.

Thursday's early report points to a tough, but slowing, economy that has been tempered by the Federal Reserve's aggressive efforts to control inflation.

The central bank raised interest rates seven times last year in hopes that higher borrowing costs would lead businesses and households to cut back on spending enough to slow the economy and curb price increases.

While the latest inflation numbers indicated receding price increases, they remain well above the Fed's 2% target as the central bank considers its next actions to accommodate a soft landing.