In the fourth quarter of 2023, the US economy surpassed expectations with a real GDP growth rate of 3.4 percent, higher than the previously reported 3.2 percent increase. This was due to upward revisions in consumer spending and nonresidential fixed investment, which were partially offset by a downward revision in private inventory investment. Despite this, the GDP growth rate marked a notable slowdown from the 4.9 percent increase seen in the third quarter, largely due to a downturn in private inventory investment and slowdowns in federal government spending and residential fixed investment.
The report revealed that GDP growth in the fourth quarter was driven by increases in consumer spending, state and local government spending, exports, nonresidential fixed investment, federal government spending, and residential fixed investment. However, these positive contributions were partly offset by a decrease in private inventory investment and an increase in imports, which subtract from the GDP calculation. Despite expectations of slowing growth in the first quarter, economists anticipate that the economic backdrop will remain supportive for markets.
Sam Millette, Director of Fixed Income for Commonwealth Financial Network noted that despite the upward revision to GDP growth rate at end of 2023 has carried over into 2024 indicating economic resilience. The strong performance at end of 2023 suggests that consumers and businesses have continued to spend money despite rising interest rates and uncertainty around trade policies.
