The pace of US economic growth moderated in the final quarter of 2023, though not to the extent anticipated, highlighting the ongoing resilience of the economy.
According to the Commerce Department’s report on Thursday, the US gross domestic product (GDP) – a key measure of economic well-being – expanded at an annualized rate of 3.3% in the last quarter of the year. While this marked a decline from the 4.9% growth in the previous quarter, it aligned with pre-pandemic levels and surpassed economists’ expectations of 2%.
Strong consumer spending and government expenditures contributed to this growth.
The Federal Reserve has been working to temper economic activity to counter inflation. Since March 2022, the Fed has raised interest rates to a 22-year high and maintained them at that level. Inflation has dropped from its peak of 9% in June 2022 to 3.4%.
Despite concerns that rate hikes could lead to job losses and a slowdown in economic activity, hiring has remained robust, with unemployment hovering near a 50-year low. While growth has decelerated, consumers have continued to spend, and the economy has weathered the rate increases, with stock markets reaching record highs.
Dan North, senior economist at Allianz Trade Americas, noted that the Fed has successfully managed to rein in inflation without stifling economic growth. He anticipated slow growth in 2024 but stopped short of predicting a recession.
Consumer sentiment, which had been pessimistic since the end of pandemic shutdowns, showed signs of improvement. The University of Michigan’s monthly consumer sentiment index recorded its largest monthly increase since 2005, with confidence bolstered by the belief that inflation had peaked and expectations of stronger income.
Looking ahead, while 2023 may not have unfolded as anticipated, there is renewed hope for the future. Elections are scheduled in various countries, including the UK and the US, prompting optimism for change. Despite ongoing global challenges such as conflicts in Ukraine and the Middle East, as well as the climate crisis, there is a sense of possibility for positive change.
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