The US economy remained startlingly sound in the fourth quarter to finish out a remarkably great 2023 as individuals and businesses continued to spend freely, despite high interest rates and price levels that have annoyed many households.
The US Commerce Department on Thursday announced that the gross domestic product, which is a measurement of all the goods and services produced, increased at a seasonally adjusted, annualised pace of 3.3% from October through December.
This was less than the 4.9% rate that occurred between July and September, when American consumers made large purchases of goods and services. Overall growth in 2023 was recorded at a strong 2.5% pace.
The most recent data highlighted the surprisingly resilient nature of the largest economy in the world, with GDP growing at an annual rate of 2% or more for the sixth consecutive quarter. The majority of last quarter’s growth was driven by consumers.
The economy expanded by 2.5% overall in 2023 in contrast to 1.9% in 2022.
“We are expecting growth to come in right in the sweet spot for the Fed,” Scott Anderson, chief US economist at BMO Capital Markets in San Francisco, told Reuters. “Slow enough to keep downward pressure on inflation, but solid enough to keep the economy growing in the first half of 2024.”
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Did fourth quarter’s rate exceeded economists’ expectations?
Based on FactSet estimates, the fourth quarter’s rate exceeded economists’ expectations by 1.5%. The end of 2023 saw a broad-based expansion in the economy, propelled by increases in government spending, corporate investment, consumer spending, exports, and housing conditions.
About two-thirds of the US economy is made up of consumer spending, which increased at a robust 2.8% rate in the fourth quarter of this year. This was a little slower than the 3.1% rate in the previous three months. In the meantime, company spending increased from 1.4% to 1.9%.
The latest GDP report reveals that the US economy has cooled some in past few months, but it’s still unclear if that was enough of a slowdown to keep the Federal Reserve on track to drop interest rates any time soon.
In a speech earlier this month, prominent Fed Governor Christopher Waller warned that rate cuts may be postponed if “economic activity that seems to have moderated in the fourth quarter of 2023 does not play out.” In recent weeks, the market’s expectations that the first rate decrease would occur in March have begun to crumble.
Will these figures give a boost to President Joe Biden?
The numbers are encouraging for US President Joe Biden, who has encountered difficulty persuading the public that the economy is still strong despite its decline from the post-pandemic boom.
However, studies conducted recently indicate that customer attitude has improved. The jobless rate is still low, the stock market is rising, and gas costs are falling.
Voters continue to be troubled by the price increase that began in 2019, although inflation has also decreased, from over 9% in 2022 to 3.4% in December.
Biden is heading to Wisconsin to deliver a speech on the economy on Thursday, where he is anticipated to emphasize that White House measures, including investments in green energy, highways and other infrastructure, have helped to the economy’s resiliency.
