- US economy exceeds expectations
- Household spending boosts growth
- Government investment aids resilience
Household and government expenditure boosted the United States economy in the final months of the previous year, propelling it to greater heights than anticipated.
In the three months leading up to December, the world’s largest economy grew at an annual rate of 3.3%, according to the Commerce Department.
Although a decrease from 4.9% in the previous quarter, this was significantly quicker than the 2% decline that many analysts had anticipated.
The annual rate of economic expansion increased from 1.9% in 2022 to 2.5% in 2023.
The data concludes a year marked by unforeseen economic resilience despite the US Central Bank’s substantial increase in borrowing costs and the deceleration of inflation.
“This report concludes a year of remarkable economic growth, regardless of perspective,” said Olu Sonola, head of regional economics for the United States at Fitch Ratings. “The momentum of economic growth going into 2024 is looking very good.”
The data provides positive implications for US President Joe Biden, who has encountered challenges in persuading the public of the economy’s continued soundness amidst a downturn following the pandemic shock.
Biden’s Economic Policy Speech
In a speech delivered on Thursday in Wisconsin, he argued that the resilience has been enhanced by White House policies, which have included investments in roads, renewable energy, and other infrastructure.
He stated there was widespread consensus among experts that the recession was imminent since he was elected. “Well, our growth is exceptionally robust… Although we still have considerable work to accomplish, we are indeed making substantial strides forward.”
Mr. Biden expressed optimism that the message was beginning to resonate.
Surveys have revealed an upward trend in consumer sentiment in recent months. While petrol prices decline and the stock market rises, unemployment remains low.
Aside from the price increase since 2019, which continues to be a source of contention among electors, the inflation rate has decelerated to 3.4% in December from over 9% in December.
Ha Le, a California resident, acknowledged that she was no longer constantly searching for the most affordable petrol.
However, the Democrat and 44-year-old corporate employee in the retail industry stated that the significant increase in the cost of groceries and child care over the past few years was still challenging to tolerate.
Economic Resilience Amidst Uncertainty
“In general, I believe the economy is not in its worst state, correct?” she stated, “We have recovered somewhat from the terror of the pandemic, but it is still not great.”
Numerous economists had anticipated that households would reduce their spending as the cost of living eroded their budgets and that business activity would decelerate in response to higher borrowing costs, issuing warnings of the impending recession.
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However, this has yet to come to pass, as substantial government expenditure, increased wage growth, and surplus savings from the pandemic have provided a cushion. Compared to the fourth quarter of 2022, the economy of the United States expanded by 3.1%.
The improving outlook has prompted speculation on Wall Street that the Federal Reserve, which significantly increased interest rates to combat inflation, may begin to reverse course.
However, according to analysts, the economy’s robustness, as depicted in the gross domestic product (GDP) report, will alleviate the bank’s urgency to take prompt action.
“Those seeking indications that the Federal Reserve is prepared to slash interest rates will be severely let down,” said Hargreaves Lansdown’s chief equity analyst, Sophie Lund-Yates.
