US fourth-quarter growth handily beats expectations on strong consumer spending
Sign up now: Get ST's newsletters delivered to your inbox
The US economy is growing partly because of labour market resilience, which is underpinning consumer spending.
PHOTO: BLOOMBERG
Follow topic:
WASHINGTON – The United States economy grew faster than expected in the fourth quarter amid strong consumer spending, defying dire predictions of a recession in 2023 after the Federal Reserve aggressively raised interest rate
Gross domestic product in the last quarter increased at a 3.3 per cent annualised rate, the Commerce Department’s Bureau of Economic Analysis said on Jan 25 in its advance estimate of fourth-quarter GDP.
The economy grew at a 4.9 per cent pace in the third quarter.
Economists polled by Reuters had forecast GDP advancing at a 2 per cent rate. Estimates ranged from a 0.8 per cent rate to a 2.8 per cent pace.
The US economy is expanding at a pace above what Fed officials regard as the non-inflationary growth rate of around 1.8 per cent.
Growth in 2023 accelerated from 1.9 per cent in 2022.
The US economy has stunned captains of industry, and some economists who had been calling for a downturn since mid-2022. Part of the economy’s stamina reflects labour market resilience
The Labour Department, in a separate report on Jan 25, said initial claims for state unemployment benefits increased 25,000 to a seasonally adjusted 214,000 for the week ended Jan 20. Economists had forecast 200,000 claims in the latest week.
Increased government spending, as well as near-zero interest rates during the Covid-19 pandemic, which allowed some corporations and households to lock in low rates, have also helped stave off a recession.
Economists largely based their gloomy forecasts on the rapid pace at which the US central bank was raising rates to dampen demand. Most have walked back their recession calls and now expect slow growth in 2024.
The Fed, at its meeting next week, is expected to keep its policy rate unchanged at the current 5.25 to 5.5 per cent range.
With the GDP report also showing inflation pressures subsiding in the last quarter, the central bank is widely anticipated to start cutting rates sometime in the first half of 2024.
Since March 2022, the Fed has raised its benchmark overnight rate by 525 basis points. REUTERS
