US Economy Expands 3.3% in Final Quarter, Surpassing Expectations
The U.S. economy outperformed expectations in the final quarter of 2023, with the Commerce Department reporting a 3.3% annualized growth rate from October through December. This strong performance marked the sixth consecutive quarter where the GDP grew at an annual pace of 2% or more, contributing to an overall expansion of 2.5% for the entire year, up from 1.9% in 2022. Consumer spending, which represents about 70% of the total economy, was a key driver, growing at a 2.8% annual rate.
Despite this robust economic growth, inflationary pressures have shown signs of easing. Consumer prices rose at a 1.7% annual rate in the fourth quarter, a decrease from 2.6% in the previous quarter. Core inflation, which excludes the more volatile food and energy prices, was at a 2% annual rate.
The Federal Reserve, which had been aggressively raising interest rates to combat inflation, has signaled that it expects to reduce its benchmark interest rate three times in 2024. This shift comes as a surprise to some who predicted that the central bank's rate hikes would induce a recession. However, the economy's resilience has been evident through consumer sentiment and a surge in spending, despite challenges such as high interest rates and inflation remaining nearly 17% above pre-pandemic levels. Forecasters are predicting more modest growth of around 1.6% for the current year, as concerns linger about high interest rates and inflation potentially impacting growth and the spending power of low- and middle-income households.
