A Robust Fourth Quarter: US Economy Surpasses Expectations with Strong GDP Growth

In the fourth quarter of 2023, the US economy outperformed expectations, as announced by the Commerce Department in a report released on Thursday. The revised data showed that real GDP grew by 3.4%, higher than the previously reported increase of 3.2%. Economists had predicted that the GDP growth rate would remain unchanged.

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

However, despite the upward revision, the GDP growth in the fourth quarter marked a significant slowdown from the impressive 4.9% increase seen in the third quarter. This deceleration was mainly due to a downturn in private inventory investment and slowdowns in federal government spending and residential fixed investment.

The report highlighted that GDP growth in the fourth quarter was driven by several positive factors such as increases in consumer spending, state and local government spending, exports, nonresidential fixed investment, federal government spending and residential fixed investment. However, these gains were partly offset by a decrease in private inventory investment and an increase in imports which subtracted from the GDP calculation.

On another front, consumer prices remained unchanged at 1.8% in the fourth quarter while core prices excluding food and energy were downwardly revised to 2.0% from 2.1%. Despite predictions of slowing growth in Q1 economists anticipate that market conditions will remain favorable for markets due to supportive economic backdrop