- The numbers exceeded expectations and demonstrated the resilience of the US economy
- Consumers and businesses continue to spend despite high interest rates
- Wall Street's benchmark indexes rose on the opening Thursday following the news
The U.S. economy grew much faster than expected in the final three months of last year, beating expectations as consumers and businesses continued to spend.
America would have easily missed out on falling into a recession that many analysts had predicted was inevitable.
Gross domestic product (GDP), a measure of all goods and services produced, rose 3.3 percent annually from October to December, the Commerce Department reported Thursday. Analysts' consensus was for a growth rate of just 2 percent for the fourth quarter.
Major Wall Street indexes jumped at the open as strong economic growth raised hopes about the likelihood of a rare “soft landing” – when inflation is reduced without a recession or a sharp rise in unemployment.
The S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average all opened in the green – after the S&P 500 closed at another record high on Wednesday.
The U.S. economy grew much faster than expected in the final three months of last year, beating expectations as consumers and businesses continued to spend
The S&P 500 jumped after news that GDP rose 3.3 percent in the fourth quarter of 2023
This was a slightly slower pace than the 4.9 percent in the third quarter from July to September – which was due to a rise in consumer spending in the summer months.
But the latest numbers reflect the surprising resilience of the US economy – and the willingness of American consumers to spend despite high interest rates and price levels.
It is the sixth consecutive quarter in which GDP has grown by 2 percent or more annually.
In addition to better-than-expected GDP numbers, there was also good news about inflation.
A measure preferred by the Federal Reserve – core personal consumption spending prices – rose 3.2 percent annually, compared with 5.1 percent a year earlier.
Beth Ann Bovino, chief economist at the U.S. Bank, told CNBC that the two sets of data – GDP and inflation – added up to “supersonic Goldilocks” because it was really a strong number, but inflation didn't show up.
“Everyone wanted to have fun. People bought new cars, invested a lot in their leisure time and went on trips. We have been expecting a soft landing for some time. “This is just a step in that direction.”
The latest figures reflect the surprising resilience of the US economy – and the willingness of American consumers to spend despite high interest rates and price levels
In 2023 as a whole, the economy grew by 2.5 percent on an annual basis. This was also well above Wall Street estimates and exceeded the annual growth of 1.9 percent in 2022.
As was the case throughout last year, consumers were the drivers of growth in the fourth quarter.
Their spending rose 2.8 percent annually from October to December – people spent heavily on clothing, furniture, vehicles, hotels and food.
Local, state and federal spending also contributed to growth.
“The outlook is good that the economy will continue to perform well this year,” Scott Hoyt, senior director at Moody's Analytics, said in a news release.
“Consumers are doing their part and spending just enough to support overall economic growth.”