The latest data from the Commerce Department’s Bureau of Economic Analysis confirms that the U.S. economy experienced robust growth in the fourth quarter, primarily fueled by strong consumer spending. However, early indicators suggest a slight slowdown at the beginning of the new year.
According to the second estimate of fourth-quarter GDP growth, the economy expanded at a 3.2% annualized rate, which was slightly lower than the previously reported 3.3% pace. This minor revision downward was attributed to a decrease in private inventory investment.
Inflation remained relatively moderate during the last quarter, with slight upward revisions compared to previous estimates.
The economy had shown significant momentum in the preceding July-September quarter, with a growth rate of 4.9%. Overall, the economy expanded by 2.5% in 2023, marking an acceleration from the 1.9% growth recorded in 2022. This growth rate surpasses the non-inflationary threshold of 1.8% as recognized by Federal Reserve officials.
Despite these positive figures, there are indications that momentum has slowed. Key indicators such as retail sales, housing starts, durable goods orders, and factory production experienced declines in January. Some of this downturn has been attributed to adverse weather conditions and challenges in adjusting data for seasonal fluctuations at the beginning of the year. However, economists are not predicting a recession at this time.
Financial markets anticipate that the Federal Reserve will commence interest rate cuts in June, a delay from previous expectations of May. Since March 2022, the central bank has implemented a series of rate hikes, totaling 525 basis points, bringing the current policy rate to the range of 5.25% to 5.50%.
