Due to strong consumer and government expenditure in the final few months of the year, the US economy expanded more quickly than predicted.
According to the Commerce Department, the largest economy in the world grew at an annual pace of 3.3% during the three months ending in December.
Although it was less than the 4.9% that many analysts had predicted, it nevertheless happened more faster than that. The economy expanded at an annual pace of 2.5% in 2023 as opposed to 1.9% in 2022.
These numbers bring an end to a year marked by an unexpected level of economic resilience, despite a dramatic increase in borrowing prices and a cooling of inflation by the US central bank.
According to a Commerce Department study released on Thursday, the U.S. easily avoided a recession that many analysts had predicted would happen as the economy grew at a much faster rate than anticipated and inflation decreased in the last three months of 2023.
Increase in GDP
Data adjusted seasonally and for inflation show that the gross domestic product, a measure of all goods and services produced, increased at an annualized rate of 3.3% in the fourth quarter of 2023.
Along with the GDP growth that was stronger than anticipated, there was some improvement in inflation. The headline rate was 1.7% over the time, but core prices for personal consumption expenditures the longer-term inflation measure preferred by the Federal Reserve rose by 2%.
The PCE price index increased 2.7% yearly, down from 5.9% the previous year, while the core number, which does not include food and energy, up 3.2% annually from 5.1%.
The numbers are encouraging for US President Joe Biden, who has had difficulty persuading the public that the economy is still strong despite its decline from the post-pandemic boom.
During a speech in Wisconsin on Thursday, he made the case that the recovery has been strengthened by White House initiatives, such as investments in renewable energy, infrastructure, and other areas.
Low Jobless rate
Surveys conducted recently indicate that customer attitude has improved. The jobless rate is still low, the stock market is rising, and petrol prices are falling.
Voters continue to find the price increase since 2019 to be a cause of contention, but inflation has also decreased, from rising to over 9% in 2022 to 3.4% in December.
Ha Le, a native of California, said that she was no longer constantly searching for the cheapest petrol.
However, the 44-year-old Democrat who works for a corporate company in the retail sector admitted that it was still hard to accept the significant increase in groceries and childcare costs over the past few years.
Many economists had predicted that as prices ate into household budgets, consumers would reduce their spending, and that corporate activity would slow down due to higher borrowing costs and warning signs of an impending recession or slump.
However, that scenario has not come to pass because of the pandemic’s large residual savings, increased wage growth, and other government expenditures that served as a buffer. The US economy expanded 3.1% in the fourth quarter of 2022 compared to 2022.
