The US economy’s fourth-quarter growth trounced forecasts as cooling inflation fueled consumer spending, capping a surprisingly strong year that defied recession calls.
Gross domestic product increased at a 3.3% annualized rate, according to the government’s preliminary estimate out Thursday. For all of 2023, the economy expanded 2.5%.
The economy’s main growth engine — personal spending — rose at a 2.8% rate. Business investment and housing also helped fuel the larger-than-expected advance last quarter.
A closely watched measure of underlying inflation rose 2% for a second straight quarter, in line with the Federal Reserve’s target, the Bureau of Economic Analysis report showed.
The GDP report showed broad consumer spending growth, with accounts for about two-thirds of the economy, as outlays for goods and services continued to climb. Combined spending on transportation, food services and recreation posted the largest increase since the second quarter of 2022.
Beyond healthy spending, which contributed 1.91 percentage points to GDP, business investment added 0.26 point. Business inventories unexpectedly added to fourth-quarter GDP.
Residential investment increased for a second straight quarter for the first time since early 2021.
Stripping out inventories, government spending and trade, inflation-adjusted final sales to private domestic purchasers — a key gauge of underlying demand — rose at a 2.6% rate.
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