Strong Economic Growth in the Fourth Quarter of 2023: Insights from GDP and Corporate Profits Data

The U.S. economy showed strong signs of growth in the fourth quarter, with GDP increasing by 3.4 percent, beating expectations of 3.2 percent but falling short of the substantial 4.9 percent growth in the third quarter, as reported by the Commerce Department. Adjusted profits after taxes reached a record high of $2.8 trillion, seeing a 3.9 percent increase, exceeding the anticipated 3.3 percent rise.

Corporate profits spiked in the fourth quarter, reaching an all-time high thanks to increased productivity and decreased unit labor costs, resulting in expanded profit margins for businesses, according to economist Lydia Boussour from EY’s analysis of the latest data. Before-tax corporate profits rose by $133 billion since the second quarter of 2022, while profit margins grew to 12.2% of GDP during this period.

Inflation dropped to 2% in the fourth quarter based on the “core” PCE price index, which excludes food and energy prices – the preferred inflation measure by the Federal Reserve. New monthly core PCE data is set to be released on Friday, indicating a year-over-year increase of 2.8%.

Market analysts were pleased with these latest GDP figures and commended consumer spending and nonresidential fixed investment for their positive contribution to upwardly revising GDP growth rates. Michelle Cluver, head of ETF portfolios at Global X highlighted these developments as evidence of continued economic resilience in America’s economy despite some uncertainty about future trends.

Overall market analysts are keeping a close eye on upcoming data releases like new monthly core PCE data which will provide more insights into how inflation may evolve over time and help policymakers make informed decisions about monetary policy.

More insights on the latest GDP numbers can be found in The Hill’s analysis by Tobias Burns.

The U.S economy showed strong signs