Experts, including those at the Federal Reserve, predicted that the United States would enter a recession in the second half of 2023. However, fueled by the strength of consumption, the world's leading economy has defied expectations and resisted tightening monetary policy much more than expected. Gross domestic product (GDP) grew by 0.8% in the fourth quarter of the year (at an annual rate of 3.3%), according to the first estimate published this Thursday by the Bureau of Economic Analysis, dependent on the Ministry of Commerce.
This growth represents a slowdown from the quarterly 1.2% (annualized 4.9%) in the third quarter, when the economy surprisingly accelerated and grew at the highest rate since 2021, but it is still dynamic Development of economic activity and exceeds analysts' forecasts. The data, which will be revised twice as more information becomes available, shows consumption continues to drive expansion.
The increase in real GDP reflected an increase in consumer spending on goods and services, exports, state and local government spending, nonresidential fixed investment, federal spending, and investment in private inventories. and residential investment. Imports, which remain in the GDP calculation, also increased. For all of 2023, real GDP increased by 2.5% (from the annual level in 2022 to the annual level in 2023), compared to an increase of 1.9% in 2022. The growth mainly reflected an increase in non-residential consumer spending reflected investment, state and local government spending, exports and federal spending, which were partially offset by declines in housing investment and inventory investment. Imports fell.
The Federal Reserve has made its most aggressive interest rate hikes since the 1980s to combat inflation, which was also the highest in four decades. Its President Jerome Powell has so far achieved the desired soft landing of the economy, i.e. reducing inflation, without triggering a recession. Savings accumulated during the pandemic and strong job creation contributed to this better-than-expected performance. Despite interest rate hikes, international conflicts, banking turmoil, strikes and other setbacks, the U.S. economy remained strong in 2023.
Now the US Federal Reserve is preparing to start cutting interest rates, but without undue haste. Members of the Federal Reserve's Monetary Policy Committee in December forecast a 0.75-point decline in the price of money over the course of 2024, although it is not clear when the first move will occur. Powell is expected to provide some guidance after the Federal Reserve meeting next week.
The Federal Reserve's Monetary Policy Committee members' forecasts for 2024, released in December, anticipate the desired scenario: growth of 1.4%, an unemployment rate of 4.1% and inflation close to the 2% target.
This puts the US economy into full swing in 2024, the election year in which President Joe Biden is seeking re-election. Growth, industrial and infrastructure investment and job creation are some of the benefits of his presidency's economic record. However, the high inflation he suffered in the first three years of his presidency continues to weigh on voters. Inflation has fallen, but prices have not fallen, and consumers see that when they go to the supermarket or gas station.
Tom Barkin, president of the Richmond Federal Reserve, warned this month of risks to growth and inflation. “A soft landing is increasingly conceivable, but by no means inevitable. I see four risks. The US economy could run out of fuel. Unexpected turbulence could occur. Inflation could stabilize at a cruising level above our 2% target. And the landing could be delayed if the U.S. economy continues to underperform,” he noted in a speech in Raleigh, North Carolina.
Follow all information Business And Business on Facebook and Xor in our weekly newsletter
The five-day agenda
The most important business quotes of the day, with the keys and context to understand their significance.
RECEIVE IT IN YOUR EMAIL