The U.S. economy showed unexpected growth in the fourth quarter of 2023, according to a report released by the Commerce Department. Revised data revealed that real gross domestic product increased by 3.4 percent, a higher rate than the previously reported 3.2 percent. Economists had anticipated no change in the GDP growth rate.
The stronger-than-expected growth was attributed to revisions in consumer spending and nonresidential fixed investment, although private inventory investment saw a slight decrease. Sam Millette, Director of Fixed Income for Commonwealth Financial Network, noted that the robust growth at the end of 2023 has carried over into 2024, providing economic resilience.
Despite the upward revision, the fourth quarter GDP growth marked a slowdown from the previous quarter’s 4.9 percent jump. Factors contributing to the deceleration included a decline in private inventory investment, reduced federal government spending, and a sluggish residential fixed investment.
On the positive side, consumer spending, state and local government spending, exports, nonresidential fixed investment, federal government spending, and residential fixed investment all saw increases in the fourth quarter. However, these gains were partially offset by a decrease in private inventory investment and an increase in imports, which subtract from the GDP calculation.
In terms of inflation, consumer prices remained unchanged at a 1.8 percent increase in the fourth quarter, while core prices (excluding food and energy) saw a slight downward revision to a 2.0 percent increase. Despite expectations of slower growth in the first quarter of 2024, the economic outlook remained favorable for markets.