Strong Fourth-Quarter Performance Defies Recession Prediction for US Economy

WASHINGTON — The U.S. economy‍ continues ‍to defy expectations, growing faster than anticipated in ​the fourth quarter. This growth was driven by strong consumer ‍spending⁣ and was‌ not hindered by the Federal​ Reserve’s aggressive interest rate hikes. The Commerce Department’s ​advance​ fourth-quarter gross⁤ domestic product report on Thursday also showed inflation ‌pressures subsiding ‌further last quarter, indicating a strong economic performance that is likely to continue into the new year.

According to Olu Sonola, head of U.S. regional economics at Fitch ⁢Ratings in New ‌York,‌ “Whichever way you slice it, this report ‍caps a ⁣year of stellar economic growth performance,⁢ particularly ​with the backdrop of the Fed’s⁢ aggressive ‍monetary policy tightening cycle.”

The report revealed that gross domestic product increased at a 3.3% ⁤annualized rate last quarter, supported by an increase in exports,​ more government ⁤spending, and​ a pick-up in business investment. This growth exceeded economists’ forecasts, indicating​ that the economy is expanding​ at a pace above what Fed officials regard as the non-inflationary growth rate.

Furthermore, the economy’s resilience is attributed to labor market strength, marked by ‍low layoffs and strong wage gains, ⁣which are underpinning consumer spending. Additionally, increased government​ spending and near-zero interest rates during the COVID-19 pandemic⁢ have helped stave off a recession, contrary ⁢to previous​ gloomy forecasts.

Consumer spending, which accounts for more than two-thirds of U.S. ⁢economic activity, ​grew at a 2.8% rate in the October-December quarter, supported​ by households drawing on ⁤savings accumulated during the pandemic ​as‌ well as subsiding inflation. This indicates that consumers continue to be a driving force behind the economy’s‌ growth.

Overall, the U.S. economy’s strong performance in the fourth quarter has ‌defied ⁣expectations and set the stage for continued⁤ growth ⁤in the new year, with the possibility of interest rate ⁣cuts on the ​horizon as inflation cools.