The economy expanded by 2.7% in the fourth quarter of last year, showing resilience in the face of economic challenges, the Bureau of Economic Analysis reported in a revised estimate Thursday.

The gross domestic product numbers, adjusted for inflation, were revised down from the previous estimate of 2.9%. Thursday's report is the second of three estimates of GDP.

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Last year’s GDP growth follows 2021’s gangbuster 5.9% GDP growth, which was so unusually high because it marked a year of reopening and economic recovery from the lows of the pandemic.

The year 2022 began on a sour note, with the first two quarters of 2022 registering negative GDP growth. That alarmed economists, as two consecutive quarters in the red is typically indicative of a recession. but then GDP growth resumed in the second two quarters, and growth on the year was also positive.

While there was talk of a recession in the first part of last year, the most notable economic trend of 2022 was the rise of rip-roaring inflation, which lowered the standards of living for households across the country.

Yet driving inflation down to healthy levels may still involve recession. Inflation stood at 6.4% for the year ending in January, according to the consumer price index, far above the Fed's target, which is roughly 2%. Inflation also only declined by a tenth of a percentage point last month, meaning that inflation is proving to be stickier than expected.

The Fed’s rate hikes are designed to slow the economy, and thus demand, causing prices of goods and services to fall. One obstacle that is proving unexpectedly difficult to overcome is that the Fed hopes that the labor market will cool off a bit but it keeps remaining strong.

The economy gained 517,000 jobs in January, smashing expectations. The unemployment rate at 3.4% is also the lowest it has been since 1969.

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Economists are going to be closely watching GDP reports for this year as a gauge of how much the Fed’s historic tightening is damaging the economy.

The Atlanta Fed's “GDP Now” tracker is currently predicting that GDP growth in the first quarter will rise by 2.5%, which shows that the U.S. does not appear to be heading for a recession in the early part of 2023.