In the fourth quarter, the US economy grew at a faster rate than anticipated, concluding a year that many expected to end in a recession with an unexpected economic upturn. The Bureau of Economic Analysis’s preliminary estimate of the fourth quarter’s US gross domestic product (GDP) revealed that the economy expanded by 3.3% annually during the period, surpassing consensus forecasts. Economists polled by Bloomberg had predicted a 2% annualized growth rate for the period. Despite the lower reading compared to the revised down third quarter GDP of 4.9%, the US economy still managed to grow at an annualized pace of 2.5% for the year, up from 1.9% in 2022. This release underscores the resilience of the US consumer, amidst ongoing concerns about a potential slowdown. It represents the latest among a series of economic data releases indicating a strong finish for the US economy in 2023, as investors closely monitor the Federal Reserve’s ability to achieve its targeted “soft landing,” where inflation returns to the 2% objective without a severe economic downturn. According to the latest S&P Flash PMI release, economic output reached its highest levels in seven months in January. Additionally, December’s retail sales figures surpassed expectations, and the labor market displayed no significant signs of cooling off, with the most recent weekly jobless claims hitting their lowest level since September 2022. Oxford Economics chief US economist Ryan Sweet expressed in a note to clients on Thursday, “The economy faired notably better than expected in the final three months of last year, reinforcing our view that market expectations for the Federal Reserve to cut interest rates as early as March is premature.” However, Sweet also acknowledged some positive aspects of the release for investors anticipating Fed rate cuts sooner rather than later. The favorable growth, combined with further declines in inflation, sets the stage for a potential soft landing. The “core” Personal Consumption Expenditures Index indicated a 2.0% price increase compared to the previous quarter, aligning with the Fed’s 2% inflation target. Pantheon Macroeconomics’ Ian Shepherdson wrote in a note to clients, “The Fed will have to ease unless they have very good reasons to think the economy is about to re-strengthen or inflation somehow will rebound. We doubt those arguments can be made with confidence, so we expect the first easing in March or May.”Dec 28, 2023; San Antonio, TX, USA; A general view of a United States flag on the field during the national anthem at the Alamo Bowl between the Arizona Wildcats and the Oklahoma Sooners at Alamodome. Mandatory Credit: Kirby Lee-USA TODAY Sports (USA TODAY Sports via Reuters Connect / Reuters)`Josh Schafer is a reporter for Yahoo Finance. Click here for the latest economic news and economic indicators to help you in your investing decisions. Read the latest financial and business news from Yahoo Finance.
