The US economy surpassed expectations in the final months of the previous year, driven by strong household and government expenditures. According to the Commerce Department, the world’s largest economy expanded at an annual rate of 3.3% in the three months leading up to December.
This growth, although a decline from the previous quarter’s 4.9%, far exceeded the 2% projected by many analysts. For the entirety of 2023, the economy saw a 2.5% annual growth rate, up from 1.9% in 2022.
These figures mark a year characterized by unexpected economic resilience, even amid significant increases in borrowing costs by the US central bank and a cooling inflation rate.
Olu Sonola, head of US regional economics at Fitch Ratings, remarked, “Whichever way you slice it, this report caps a year of stellar economic growth performance. The momentum of economic growth going into 2024 is looking very good.”
These numbers provide a boost for US President Joe Biden, who has faced challenges in convincing the public of the economy’s health as it transitions from the post-pandemic boom. In an upcoming speech in Wisconsin, he is expected to highlight White House policies, such as investments in green energy and infrastructure, as contributing factors to this resilience.
Despite concerns about rising prices since 2019, inflation has eased, dropping to 3.4% in December from over 9% in 2022. While consumer sentiment has improved, fuel prices have decreased, and unemployment remains low.
However, some, like California resident Ha Le, note challenges such as increased grocery and childcare costs in recent years.
Contrary to predictions of reduced spending and a cooling business environment due to higher borrowing costs, the economy has not slowed significantly. Factors such as leftover pandemic savings, rising wages, and continued government spending have provided a buffer.
The positive economic outlook has led to speculation on Wall Street regarding potential shifts in Federal Reserve policy, particularly regarding interest rates. Nonetheless, analysts suggest that the robust GDP report will alleviate pressure on the Fed to act swiftly.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, stated, “Those hunting for clues that the Federal Reserve is ready to take an axe to interest rates will be sorely disappointed.”