According to the Associated Press and other sources, the U.S. Department of Commerce announced that its GDP growth rate in the fourth quarter of last year was 3.3 percent (compared to the previous quarter, based on annualized economic growth), which significantly exceeded the market’s forecast. The 3.3 percent growth rate is lower than the 4.9 percent growth rate in the third quarter, but higher than the market forecast (2 percent). The annual GDP growth rate last year was also 2.5 percent, overshadowing concerns over an economic downturn.
The Associated Press attributed the increase to personal consumption and government spending. Personal consumption expenditure increased 2.8 percent in the fourth quarter compared to the previous quarter, while state and local government spending also increased 3.7 percent and 2.5 percent, respectively. Total private domestic investment also increased 2.1 percent, contributing to the GDP growth in the fourth quarter.
The economic growth rate was higher than expected, but inflation slowed. The personal consumption expenditure price index, which was released along with GDP, hit 2.7 percent in the fourth quarter, falling sharply from 5.9 percent in the same period last year. Excluding volatile food and energy, the core personal consumption expenditure price index is 3.2 percent, down from 5.1 percent a year ago. However, it is still higher than the U.S. Federal Reserve’s target of 2 percent.
Although the Ministry of Commerce announced higher-than-expected economic growth and stable inflation, some were wary of optimism. The number of new unemployment insurance claims was 214,000, an increase of 25,000 from the previous week, and orders for durable goods in December last year amounted to only $295.6 billion, which is below market forecasts. Geopolitical risks due to the U.S. presidential election, the ongoing war between Israel and Hamas, and the war in Ukraine, which are scheduled for November, are also cited as factors of instability in the U.S. economy.
“Some economists have withdrawn their outlook for a recession, but we should not be sure yet,” said Eliza Winger, an analyst at Bloomberg Economics. “The labor market is shrinking and concerns about consumer demand are growing, which could slow GDP growth this year.”