The U.S. economy showed resilience in the final quarter of 2023, growing at a solid 3.4% annual pace, according to the latest report from the Commerce Department. This figure represents an upgrade from the previous estimate of 3.2% and confirms a slight deceleration from the robust 4.9% growth seen in the preceding quarter.
The growth was primarily driven by increasing consumer spending, exports, and business investments in buildings and software. Notably, this marks the sixth consecutive quarter in which the economy has expanded at an annual rate exceeding 2%, showcasing consistent growth.
For the entire year of 2023, the U.S. economy, the largest in the world, grew by 2.5%, a notable improvement from the 1.9% growth recorded in 2022. Looking ahead, the economy is projected to continue growing at a slower but still respectable rate of 2.1% in the current January-March quarter, as per forecasts from the Federal Reserve Bank of Atlanta.
The report also indicated a moderation in inflation pressures, with the personal consumption expenditures price index rising at a 1.8% annual rate in the fourth quarter, down from 2.6% in the previous quarter. Core inflation, which excludes volatile food and energy prices, remained steady at 2% from October through December.
Despite the Federal Reserve's series of interest rate hikes aimed at curbing inflation, the economy has demonstrated remarkable strength, with consistent job growth and a decline in inflation rates. Employers added an average of 251,000 jobs per month in 2023, with a further increase to 265,000 jobs per month from December through February.
Inflation, which peaked at 9.1% in June 2022, has since decreased to 3.2%, though it remains above the Fed's target of 2%. The combination of robust economic growth and easing inflation has raised hopes that the Fed can achieve a 'soft landing' by effectively managing inflation without triggering a recession.
The latest GDP report marks the Commerce Department's final estimate for fourth-quarter growth, with the next update on January-March growth expected on April 25.
