GDP grew at 3.3% rate last quarter
Easily topped forecasters’ expectations
The US economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled, and a widely predicted recession never materialized.
Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.
The latest reading is preliminary and may be revised in the months ahead.
Forecasters entered 2023 expecting the Federal Reserve’s aggressive campaign of interest-rate increases to push the economy into reverse. Instead, growth accelerated: For the full year, measured from the end of 2022 to the end of 2023, GDP grew 3.1 percent, up from less than 1 percent the year before and faster than the average for the five years preceding the pandemic. (A different measure, based on average output over the full year, showed annual growth of 2.5 percent in 2023.)
“Stunning and spectacular,” Diane Swonk, chief economist at KPMG, said of the latest data. “We’ll take the win.”
There is little sign that a recession is imminent this year, either. Early forecasts point to continued — albeit slower — growth in the first three months of 2024. Layoffs remain low, and job growth has held steady. Cooling inflation has meant that wages are again rising faster than prices. And consumer sentiment is at last showing signs of rebounding after years in the doldrums.
“It’s hard to imagine how things could look better for the soft landing,” said Brian Rose, senior economist at UBS. “Looking back at last year, the combination of growth and inflation that we had was not considered in the realm of possibility by most people. To have such strong growth, low unemployment, and to have inflation coming down that quickly, even the optimists weren’t that optimistic.”
The fourth-quarter data provided more evidence that the recovery remains on solid footing. Consumer spending, the bedrock of the US economy, grew at a 2.8 percent annual rate, only modestly slower than the prior quarter. The housing sector, which was battered by high interest rates in 2022 and early 2023, grew modestly for the second quarter in a row. Businesses stepped up their investment in equipment. Personal income rose faster than prices as the strong job market continued to benefit workers.