ByPAUL WISEMAN
Updated [hour]:[minute] [AMPM] [timezone], [monthFull] [day], [year]
WASHINGTON (AP) — The U.S. economy grew at a robust 3.2% annual pace from October through December, propelled by healthy consumer spending, the Commerce Department reported Wednesday in a slight downgrade from its initial estimate.
The expansion in the nation’s gross domestic product — the economy’s total output of goods and services — slipped from a red-hot 4.9% from July through September. The fourth-quarter GDP numbers were revised down from the 3.3% pace Commerce initially reported last month. U.S. growth has now topped 2% for six straight quarters, defying fears that high interest rates would tip the world’s largest economy into a recession.
Far from stumbling, the economy grew 2.5% for all of 2023, topping the 1.9% growth in 2022.
Consumer spending, which accounts for about 70% of U.S. economic activity, grew at a 3% annual pace from October through December. Spending by state and local governments rose at a 5.4% annual rate from October through December, fastest pace since 2019. Growing exports also contributed to fourth-quarter growth.
Wednesday’s report also showed inflation pressures continuing to ease. The Federal Reserve’s favored measure of prices — the personal consumption expenditures price index — rose at a 1.8% annual rate in the fourth quarter, down from 2.6% in the third. Stripping out volatile food and energy prices, so-called core inflation was up 2.1%, accelerating slightly from a 2% increase in the third quarter.
The United States is expected to keep churning out growth in 2024. The International Monetary Fund expects the American economy to expand 2.1% this year — more than twice its forecasts for growth in the major advanced economies Japan, Germany, the United Kingdom, France and Italy.
Voters are weighing the economy’s health in advance of November’s presidential election. Many Americans are exasperated with high prices and blame President Joe Biden. Although inflation has eased and hourly wage hikes have beaten price increases over the past year, consumer prices are still 17% higher than they were three years ago.
In response to resurgent inflation, the Fed raised its benchmark interest rate 11 times between March 2022 and July 2023, taking it to the highest level in more than two decades. Higher borrowing costs have reined in the inflationary surge. Last month, consumer prices were up just 3.1% from January 2023, down from a peak of 9.1% in June 2022 and coming closer to the Fed’s 2% target.
To the surprise of the Fed and most economists, the progress against inflation has so far been accomplished without causing much economic pain. The unemployment has come in below 4% for 24 straight months, longest such streak since the booming 1960s. And employers have been adding a healthy average of 244,000 jobs a month over the past year, including more than 300,000 in both December and January.
American households are largely in good financial shape, allowing consumers to spend. And businesses have improved productivity by using automation and finding ways to make employees work more efficiently.
The combination of easing inflation and sturdy hiring and GDP growth has raised hopes the Fed can pull off a rare “soft landing’’ — vanquishing inflation without causing a recession.
“We think growth will slow but will remain positive over coming quarters,’' said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. But the economy is likely to get a lift, she said, from Fed rate cuts later this year. The central bank has signaled that it expects to cut its benchmark rate three times in 2024.
Wednesday’s report was the second of three Commerce Department estimates of fourth-quarter GDP growth. The final revision comes out March 28.
FAQs
Gross domestic product rose at a revised 3.2% annualized pace in the fourth quarter, compared with a prior estimate of 3.3%. Consumer spending advanced at a 3% rate, faster than initially estimated, Bureau of Economic Analysis figures showed Wednesday. Inflation was revised higher.
What was the GDP in the fourth quarter? ›
The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 4.1 percent in the fourth quarter, compared with an increase of 3.4 percent (table 1).
What was economic growth in the US last quarter? ›
US economic growth for last quarter is revised up slightly to a healthy 3.4% annual rate. WASHINGTON (AP) — The U.S. economy grew at a solid 3.4% annual pace from October through December, the government said Thursday in an upgrade from its previous estimate.
Is a recession 3 quarters of negative growth? ›
Most commentators and analysts use, as a practical definition of recession, two consecutive quarters of decline in a country's real (inflation-adjusted) gross domestic product (GDP)—the value of all goods and services a country produces.
What quarter did the Great recession start? ›
On December 1, 2008, the National Bureau of Economic Research (NBER) declared that the United States entered a recession in December 2007, citing employment and production figures as well as the third quarter decline in GDP. The Dow Jones Industrial Average lost 679 points that same day.
How many quarters was the Great recession? ›
The seasonally adjusted PPP‑weighted real GDP for the G20‑zone, however, is a good indicator for the world GDP, and it was measured to have suffered a direct quarter on quarter decline during the three quarters from Q3‑2008 until Q1‑2009, which more accurately mark when the recession took place at the global level.
What was the GDP revision in q4? ›
The U.S. economy grew at a faster annual rate than previously estimated in the fourth quarter, according to the Bureau of Economic Analysis. The BEA said real gross domestic product grew at a 3.4% annual rate, which was revised up from a prior estimate of 3.2% growth.
How do you calculate GDP growth rate? ›
There are two ways to calculate the real economic growth rate. Real GDP can be calculated by taking the difference between the most recent year's real GDP and the prior year's real GDP. Then, divide this difference by the prior year's real GDP.
Is GDP increasing or decreasing? ›
Current-dollar GDP increased 6.3 percent, or $1.61 trillion, in 2023 to a level of $27.36 trillion, compared with an increase of 9.1 percent, or $2.15 trillion, in 2022 (tables 1 and 3).
How much did the economy grew last quarter? ›
The increase in gross domestic product, while slower than in the previous period, showed the resilience of the recovery from the pandemic's upheaval.
The economy was on solid footing in February 2020. It had been growing since mid-2009 and the huge job losses from the 2007-2009 Great Recession had been erased by 2014. The economic expansion continued into 2020, becoming the longest expansion on record before ending abruptly in the COVID-19 pandemic.
When did the US economy grow? ›
The most vigorous, sustained periods of growth, on the other hand, took place from early 1961 to mid-1969, with an expansion of 53% (5.1% a year), from mid-1991 to late 2000, at 43% (3.8% a year), and from late 1982 to mid-1990, at 37% (4% a year).
What triggers a recession? ›
Recessions can be the result of a decline in external demand, especially in countries with strong export sectors. Adverse effects of recessions in large countries—such as Germany, Japan, and the United States—are rapidly felt by their regional trading partners, especially during globally synchronized recessions.
What can trigger a recovery from a recession? ›
Economies recover from a recession after a period of economic adjustment in the markets. Economies also recover through fiscal stimulus programs. Both the central bank and the government impact the economy through monetary policy and fiscal policy.
Are we in a recession 2024? ›
The New York Stock exchange (NYSE) at Wall Street, Jan. 31, 2024, in New York. A forward-looking measure of the U.S. economy continued to decline in January but importantly it is no longer signaling a recession in 2024, reflecting an economy outperforming expectations.
What is the economic growth of the US q3? ›
Gross domestic product increased at a 5.2% annualized rate last quarter, revised up from the previously reported 4.9% pace, the Commerce Department's Bureau of Economic Analysis (BEA) said in its second estimate of third-quarter GDP. It was the fastest pace of expansion since the fourth quarter of 2021.
How many quarters of decline in GDP does it take to move the US economy into a recession? ›
The technical definition of a recession is two consecutive quarters of declining Gross Domestic Product (GDP) growth. However, more complex formulas are often used.
