The U.S. economy grew faster than expected in the fourth quarter, capping a year that many had expected would end in recession with one final economic surprise.
The Bureau of Economic Analysis's preliminary estimate of U.S. gross domestic product (GDP) for the fourth quarter showed the economy grew 3.3% on an annual basis. during the phase, More quickly as consensus forecasts. Economists surveyed by Bloomberg estimated that the U.S. economy grew 2% on an annual basis during the period.
The figure was below third-quarter GDP, which was revised downwards to 4.9%. For the year, the US economy grew at an annual rate of 2.5%, up from 1.9% in 2022.
The GDP release highlights the resilience of the US consumer despite ongoing concerns about a slowdown. This is the latest in a series of economic data releases showing the U.S. economy ended 2023 on solid ground, as investors closely watch whether the Fed can achieve its vaunted “soft landing” of keeping inflation down without a severe economic downturn returns to the 2% target.
Economic output reached its highest level in seven months in January, according to S&P's latest flash PMI release. The latest consumer spending figures came in higher than expected, with retail sales in December coming in higher than expected. And the labor market has shown no serious signs of slowing, with the latest reading of weekly jobless claims hitting its lowest level since September 2022.
“The economy performed significantly better than expected in the final three months of last year, reinforcing our view that market expectations that the Federal Reserve will cut interest rates as early as March are premature,” wrote Ryan Sweet, chief economist for the U.S. at Oxford Economics, in a note to clients on Thursday.
However, Sweet noted that the release had some positives for investors hoping that the Fed's rate cuts come sooner rather than later. The positive growth was accompanied by a further decline in inflation, setting the stage for a possible soft landing. The “core” index of personal consumption spending showed prices rose 2.0% from the previous quarter, in line with the Fed's inflation target of 2%.
The story goes on
“The Fed will have to ease rates unless it has very good reasons to believe that the economy will rebound or inflation will somehow recover,” Ian Shepherdson of Pantheon Macroeconomics wrote in a note to clients. “We doubt that these arguments can be made with confidence, so we expect the first easing of restrictions in March or May.”
Dec 28, 2023; San Antonio, TX, USA; A general overall view of a U.S. flag on the field during the playing of the national anthem in the Alamo Bowl between the Arizona Wildcats and the Oklahoma Sooners at the Alamodome. Mandatory Credit: Kirby Lee-USA TODAY Sports (USA TODAY Sports via Portal Connect / Portal)
Josh Schafer is a reporter for Yahoo Finance.
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