U.S. Economy Outperforms Expectations in Fourth Quarter of 2023, Driven by Strong Consumer Spending and Nonresidential Investment

The U.S. economy surpassed expectations in the fourth quarter of 2023, with real GDP growth reaching 3.4 percent, according to a report released by the Commerce Department on Thursday. This was higher than the previously reported increase of 3.2 percent, and economists had anticipated that the GDP growth rate would remain unchanged.

The robust growth in the fourth quarter was attributed to upward revisions in consumer spending and nonresidential fixed investment, which were partially offset by a downward revision in private inventory investment. Sam Millette, Director of Fixed Income for Commonwealth Financial Network, noted that this strong performance has carried over into 2024, indicating economic resilience.

Despite the upward revision, the GDP growth rate in the fourth quarter marked a notable slowdown from the 4.9 percent increase seen in the third quarter due to factors such as a downturn in private inventory investment and slowdowns in federal government spending and residential fixed investment.

The report revealed that GDP growth was driven by several positive contributors during the fourth quarter, including increases in consumer spending, state and local government spending, exports, nonresidential fixed investment, federal government spending, and residential fixed investment. However, these gains were partially offset by decreases in private inventory investment and an increase in imports.

On inflation front, consumer prices remained unchanged at 1.8 percent while core prices excluding food and energy were revised downwards to 2% from 2.1%. Despite expectations of slowing growth in first quarter economists anticipate that economic conditions will remain supportive for markets.

Overall, despite some concerns about inflation and slowing economic growth rates going forward into next year; economists are optimistic about current economic conditions