The U.S. economy grew at a solid 3.4% annual pace from October through December, according to an upgraded estimate from the government. This was an improvement from the previous estimate of 3.2%. The report from the Commerce Department confirmed that the economy decelerated from its high of 4.9% in the previous quarter, but still performed well despite higher interest rates. Consumer spending, exports, and business investment in buildings and software were contributing factors to the growth, marking the sixth consecutive quarter with an annual growth rate above 2%.
For the full year of 2023, the U.S. economy grew by 2.5%, up from 1.9% in 2022. The economy is believed to be growing at a slower rate of 2.1% in the current January-March quarter, according to the Federal Reserve Bank of Atlanta. The report also indicated that inflation pressures were easing, with the personal consumption expenditures price index rising at a 1.8% annual rate in the fourth quarter, down from 2.6% in the previous quarter.
Despite the Federal Reserve’s efforts to combat inflation by raising interest rates, the economy has continued to grow and add jobs. The Fed increased its benchmark rate 11 times to a 23-year high, making borrowing more expensive for businesses and households. However, the economy has remained resilient, with employers adding an average of 251,000 jobs per month in 2023. Inflation has also cooled down from its peak of 9.1% in June 2022 to 3.2%, although it still exceeds the Fed’s 2% target. The combination of steady growth and decreasing inflation has raised hopes for a “soft landing” in which inflation is controlled without causing a recession.
The Commerce Department’s report on GDP growth in the fourth quarter was the third and final estimate, with the first estimate for January-March growth expected to be released on April 25. The economy’s performance over the past two years has defied predictions of a recession, as it continued to grow despite higher borrowing rates. The outlook for the economy remains positive, with expectations that the Fed can successfully manage inflation without triggering a downturn. As the data continues to be analyzed and new estimates are released, policymakers and economists will be closely monitoring the economy’s performance and making adjustments as needed.
