Economy Surprises with Strong Fourth Quarter Performance, But Inflation Remains a Concern

The US economy outperformed expectations in the fourth quarter of 2023, as revealed by the Commerce Department in a report released on Thursday. Revised data showed that real GDP grew by 3.4 percent, higher than the previously reported 3.2 percent increase. Economists had anticipated that the GDP growth rate would remain unchanged.

The report attributed the stronger growth to upward revisions in consumer spending and nonresidential fixed investment, which were partially offset by a downward revision in private inventory investment. Sam Millette, Director of Fixed Income for Commonwealth Financial Network, noted that the robust growth at the end of 2023 has carried over into 2024, indicating economic resilience.

Despite the upward revision, the GDP growth in the fourth quarter marked a notable slowdown from the 4.9 percent increase seen in the third quarter. This deceleration was largely due to a downturn in private inventory investment, as well as slowdowns in federal government spending and residential fixed investment.

The report highlighted 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.

On the inflation front