US Economic Growth: Last Quarter Sees Slight Uptick to Healthy 3.4% Annual Rate

The U.S. government announced on Thursday that the country’s economy grew at a robust 3.4% annual rate in the last quarter of the year, revising its earlier estimate up from 3.2%. This data from the Commerce Department signifies a slight slowdown from the 4.9% growth rate experienced in the third quarter but still represents a strong economic performance. This growth was driven by an increase in consumer spending, exports, and investments in infrastructure and software, marking the continuation of a growth trend with the economy expanding at over a 2% annual rate for six consecutive quarters.

For the entirety of 2023, the U.S. economy, which is the largest globally, recorded a growth rate of 2.5%, an improvement from the 1.9% growth in 2022. Projections for the current quarter (January-March) indicate a growth rate of 2.1% on an annual basis, as estimated by the Federal Reserve Bank of Atlanta.

The report also indicates a continuing trend of easing inflation, with the personal consumption expenditures price index, a key inflation gauge preferred by the Federal Reserve, increasing at a 1.8% annual rate in the last quarter, a decrease from 2.6% in the preceding quarter and marking the lowest increase since the economic downturn in 2020 caused by COVID-19.

Excluding the unpredictable food and energy sectors, the core inflation rate remained steady at 2% through the last quarter, mirroring the rate from the previous quarter.

Despite the Federal Reserve’s aggressive rate hikes — elevating its benchmark interest rate 11 times since March 2022 to a peak not seen in 23 years — the economy has shown remarkable resilience. Contrary to fears of mass layoffs and a recession, the economy has continued to expand, and job creation has remained strong, with an average of 251,000 jobs added monthly last year and 265,000 monthly from December through February.

With inflation gradually decreasing from a high of 9.1% in June 2022 to 3.2%, yet still above the Federal Reserve’s 2% target, there’s growing optimism for the Federal Reserve to achieve a “soft landing,” successfully reducing inflation without leading to a recession.

This latest update is the third and final revision for the fourth quarter GDP growth from the Commerce Department, with the first estimate for the January-March quarter’s growth anticipated on April 25.