Economy grows at strong 3.3% pace in 4Q
WASHINGTON — The nation’s economy grew at an unexpectedly brisk 3.3% annual pace from October through December as Americans showed a continued willingness to spend freely despite high interest rates and price levels that have frustrated many households.
Thursday’s report from the Commerce Department said the gross domestic product — the economy’s total output of goods and services — decelerated from its sizzling 4.9% growth rate the previous quarter. But the latest figures still reflected the surprising durability of the world’s largest economy, which US voters are assessing ahead of the November elections.
The latest data marked the sixth straight quarter in which GDP has grown at an annual pace of 2% or more. Consumers, who account for about 70% of the total economy, drove the growth. Their spending expanded at a 2.8% annual rate, for items ranging from clothing, furniture, recreational vehicles and other goods to services like hotels and restaurant meals.
The GDP report also showed that despite the robust pace of growth in the October-December quarter, inflationary measures continued to ease. Consumer prices rose at a 1.7% annual rate, down from 2.6% in the third quarter. And excluding volatile food and energy prices, so-called core inflation came in at a 2% annual rate.
Those inflation numbers could reassure the Federal Reserve’s policymakers, who have already signaled that they expect to cut their benchmark interest rate three times in 2024, reversing their 2022-2023 policy of aggressively raising rates to fight inflation. Some economists think the Fed could begin cutting rates as early as May.
Nathan Sheets, global chief economist at Citi, said that recent experience suggests that economic growth can remain solid even as inflation cools.
“It underscores for the Fed that they don’t have to be in a hurry” to ease borrowing rates to aid the economy, said Sheets, who thinks the first rate cut will occur in June.