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The U.S. economy grew a solid 3.2% in the fourth quarter, a slight decline from the government's initial estimate.

The U.S. economy grew a solid 3.2% in the fourth quarter, a slight decline from the government's initial estimate.

 


WASHINGTON (AP) The U.S. economy grew at a robust 3.2% annually between October and December, propelled by healthy consumer spending, the Commerce Department reported Wednesday, down slightly from its initial estimate.

The country's gross domestic product expansion and the economy's total output of goods and services fell 4.9 percent between July and September. Fourth-quarter GDP figures were revised down from the 3.3% pace initially reported by Commerce last month. U.S. growth has now topped 2% for the sixth consecutive quarter, defying fears that high interest rates could tip the world's largest economy into a recession.

Far from stumbling, the economy grew 2.5% over all of 2023, outpacing 2022's 1.9% growth.

Consumer spending, which accounts for about 70% of U.S. economic activity, grew at an annual rate of 3% from October to December. State and local spending increased at an annual rate of 5.4% from October to December, the fastest pace since 2019. Growth in exports also contributed to fourth-quarter growth.

Wednesday's report also showed that inflationary pressures continued to ease. The Federal Reserve favored price measurement: the personal consumption expenditures price index increased at an annual rate of 1.8% in the fourth quarter, compared to 2.6% in the third. Excluding volatility in food and energy prices, so-called core inflation rose 2.1%, a slight acceleration from a 2% rise in the third quarter.

The United States is expected to continue generating growth in 2024. The International Monetary Fund projects that the U.S. economy will grow 2.1% this year, more than double its forecast for growth in major advanced economies than are Japan, Germany, the United Kingdom, France and Italy. .

Voters are assessing the health of the economy ahead of the November presidential election. Many Americans are exasperated by high prices and blame President Joe Biden. Even though inflation has eased and hourly wage increases have outpaced price increases over the past year, consumer prices are still 17% higher than they were a year ago. is three years old.

In response to resurgent inflation, the Fed raised its benchmark interest rate 11 times between March 2022 and July 2023, bringing it to its highest level in more than two decades. Rising borrowing costs have curbed the inflationary surge. Last month, consumer prices rose just 3.1% from January 2023, down from a peak of 9.1% in June 2022 and close to the 2% target of the federal government.

To the surprise of the Fed and most economists, progress against inflation has so far been made without causing much economic pain. Unemployment has fallen below 4% for 24 straight months, the longest such streak since the booming 1960s. And employers created an average of 244,000 jobs per month over the past year, including more than 300,000 in December and January.

American households are generally in good financial health, which allows consumers to spend. And businesses have improved their productivity by using automation and finding ways to enable their employees to work more efficiently.

The combination of falling inflation and strong growth in hiring and GDP has raised hopes that the Fed can achieve a rare soft landing that defeats inflation without causing a recession.

We think growth will slow but remain positive in the coming quarters,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. But the economy should get a boost , she said, thanks to the Fed's rate cuts later this year. The central bank has indicated that it plans to cut its key rate three times in 2024.

Wednesday's report was the second of three estimates from the Commerce Department for fourth-quarter GDP growth. The final revision comes out on March 28.

Sources

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2/ https://apnews.com/article/economy-inflation-federal-reserve-gdp-unemployment-22f096fe881d4a48314c67d6f4cc67ba

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