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.
Disagree US economy remains on shaky ground despite positive Q4.
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