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U.S. economy grew by 3.3% in fourth quarter

Published Jan 25, 2024 08:37AM ET Updated Jan 25, 2024 09:42AM ET
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Investing.com -- The U.S. economy grew at a faster than anticipated rate in the fourth quarter, as activity remained robust even as it shows signs of slowing back down to a pre-pandemic pace.

Real gross domestic product (GDP) in the world's largest economy expanded at an annual rate of 3.3% in the three months to the end of December, decelerating from 4.9% in the third quarter, according to a key first reading from the Commerce Department. Economists had predicted a mark of 2.0%.

Consumer spending for both goods and services was the main driver of growth, according to Kathy Jones, Chief Fixed Income Strategist at Charles Schwab (NYSE:SCHW), in a post on social media platform X.

When measured against the year-ago period, GDP increased by 3.1%, adding to mounting evidence of the resilience of the U.S. economy despite historically elevated interest rates. For the year as a whole, the number rose by 2.5%, up from 1.9% in 2022. Jones called the performance "remarkable," particularly in the face of soaring borrowing costs.

At the start of 2023, concerns were high that these tighter financial conditions -- a tactic by the Federal Reserve aimed at corraling inflation back down to the central bank's 2% target -- could lead to a steep downturn in growth.

However, Thursday's data indicates that America is still on track for a so-called "soft landing," in which the Fed successfully quells price gains without sparking an economic meltdown.

Expectations for such a scenario have helped fuel a recent rally in stock markets, but Fed officials have stressed that it is not an inevitability and more data will need to be seen before they are assured that a soft landing will actually happen.

The GDP figure could factor into this outlook, although analysts at ING have argued that the publication of the Fed's preferred measure of price growth on Friday will be "far more important" for rate-setters.

While the central bank is widely tipped to keep borrowing costs on hold at a more than two-decade high of 5.25% to 5.50% at its upcoming policy meeting later this month, the GDP and inflation data this week may help determine how policymakers approach potential rate cuts in 2024.

Indications of lingering economic strength and easing inflation may persuade the Fed that it does not need to move quickly to lower borrowing costs. Expectations late last year that the Fed would roll out reductions in early 2024 have waned, with the CME Group's (NASDAQ:CME) closely-watched FedWatch Tool now forecasting the first cut in May.

"Attention concerning [first-quarter] activity now becomes more focused," analysts at Evercore ISI said in a note. "For now, the fixed income market is discounting the risk of a near term recession."

The rate-sensitive 2-year U.S. Treasury yield and the benchmark 10-year yield, which typically move inversely to prices, both declined, while the dollar index -- a gauge of the greenback against a basket of currencies -- inched up slightly. U.S. stocks climbed in early trading following the report.

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U.S. economy grew by 3.3% in fourth quarter
 

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Comments (32)
Barry Nickerson
Subbuilder Jan 26, 2024 6:25AM ET
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Has anyone actually looked up the latest default rates on Credit Cards?  Seen how many cards are 90+ days overdue?  It's quite alarming.  I wonder if there is any correlation between those numbers and what this article is all about.   Maybe another anti-inflation act would help this situation.
Tre Hsi
Tre Hsi Jan 26, 2024 6:25AM ET
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what is "anti-inflation act"?  there was a inflation reduction act, but what is anti-inflation?  is that like deflation?
Mark Gess
Mark Gess Jan 26, 2024 6:25AM ET
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Tre Hsi  Funny, that inflation reduction act didn't do a damned thing to reduce inflation.
Barry Nickerson
Subbuilder Jan 26, 2024 6:25AM ET
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Tre Hsi I'd say I must be on to something, since Mr. Tre can only attempt to pick on my wording.  How about refuting my overall comment?
Brad Albright
Brad Albright Jan 25, 2024 6:25PM ET
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We can discard the magabillies' wishful explanation that all or most of the US economic growth was from government spending (one moran even asserting that the US economy is shrinking). The fact is that growth was robust across multiple goods, including consumer spending on goods, food services, accommodations, health care, and exports in goods and services.
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Brad Albright
Brad Albright Jan 25, 2024 6:25PM ET
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@Subbuilder. Wrong. GDP is inflation adjusted. Get your facts straight.
Brad Albright
Brad Albright Jan 25, 2024 6:25PM ET
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@Ri O. You're opinion is uniformed. GDP is inflation adjusted, so NONE of the growth is because of prices.
Barry Nickerson
Subbuilder Jan 25, 2024 6:25PM ET
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Brad Albright Whether you simply dislike Brandy, or outright hate him/her, it's always right on the button when it comes to non-opinionated facts. I stand corrected, this time.
Brad Albright
Brad Albright Jan 25, 2024 6:25PM ET
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Barry Nickerson Aw, shucks. Makes me want to invite you for a beer.
Steven Angelo
Steven Angelo Jan 25, 2024 6:25PM ET
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don’t waste your time trying to contradict maga lies and misinformation with facts.
Steven ML
Steven ML Jan 25, 2024 12:59PM ET
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I bet the Commerce Department will also tell you pigs can fly
JaneJohn Doe
JaneJohn Doe Jan 25, 2024 12:27PM ET
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TLT is toast
Line Work
Line Work Jan 25, 2024 11:20AM ET
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I have to wonder to what extent government spending is influencing all these positive measures...
Mark Gesswein
Mark Gesswein Jan 25, 2024 11:20AM ET
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You’re on tue right path, Line Work. MOST of the GDP ‘growth’ is due to government spending. The US economy is actually SHRINKING, if you factor out all the government money that’s being pumped into the system. Most of the ‘new job’ growth is coming from the government sector as well. All these glowing numbers that the Biden shills keep touting as being so great are almost EXCLUSIVELY due to government activity and not private businesses.
Marty Summers
Marty Summers Jan 25, 2024 11:20AM ET
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it's WAR
Brad Albright
Brad Albright Jan 25, 2024 10:58AM ET
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This is horrible! Enough of Biden's socialism. Elect Trump in 2024 and end this carnage!
Tre Hsi
Tre Hsi Jan 25, 2024 10:58AM ET
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who doesn't want a repeat of $8T budget deficits and 14% unemployement?
Djamshid Bakiev
AMMM Jan 25, 2024 10:50AM ET
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Yellen to president!
Line Work
Line Work Jan 25, 2024 10:50AM ET
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How about we elect someone who doesn't already have gray hair instead?
Tre Hsi
Tre Hsi Jan 25, 2024 10:50AM ET
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Line Work  The Donald has orange hair, no gray at all!  If that's what you are going for, sure......
John Hill
John Hill Jan 25, 2024 10:50AM ET
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so I guess a billionaire who gave America The greatest economy in 50 years, according to Independent analysts, isn't good enough for you? only in the mindlessness of a liberal.
George Pichurov
George Pichurov Jan 25, 2024 10:39AM ET
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I am still unclear what we cheer up. Strong growth, although it dropped from 4.9% to 3.3% in a single quarter, or not so strong growth, which warrants rate cut regardless what inflation figure comes out. Or maybe both?
TheLast LoserDon
TheLast LoserDon Jan 25, 2024 10:21AM ET
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nice pop in markets, sorry bears, thoughts and prayers heading your way.
Casador Del Oso
Casador Del Oso Jan 25, 2024 10:12AM ET
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A 25bps rate HIKE is inevitable for year end 2024, especially once the world feels the economic effects of the Red Sea war.
 
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