The final economic numbers are out for the final quarter of 2023, and economists were somewhat shocked to see the gross domestic product (GDP) grew more than expected while some indicators of inflation remained relatively flat.
GPD, which is the measure of all the goods and services produced in the United States, increased at a 3.3 percent annualized rate in the fourth quarter of last year. The numbers are based on seasonally adjusted data. The economic consensus on Wall Street prior to the numbers being released was closer to 2 percent, marking a major boom that surpassed expectations.
The previous quarter’s revised numbers also showed 4.9 percent growth.
The U.S. economy continues to skirt around a potential recession, keeping markets hopeful that the Federal Reserve’s attempts to navigate a “soft landing” after sky-high inflation were successful. However, there are still some concerns about the economy going into this year.
Some of the worries center around the lagged effects of monetary policy, specifically the 11 interest rate hikes totaling 5.25 percentage points that the Fed approved between March 2022 and July 2023. Conventional economic wisdom is that it can take as long as two years for such policy tightening to make its way through the system, so that could contribute to slowness ahead.
Other angst centers around how long consumers can keep spending as savings dwindle and high-interest debt loads accrue. Finally, there’s the nature of what is driving the boom beyond the consumer: Government deficit spending has been a significant contributor to growth, with the total federal IOU at $34 trillion and counting. The budget deficit has totaled more than half a trillion dollars for the first three months of fiscal 2024.
There also are political worries as the U.S. enters the heart of the presidential election campaign, and geopolitical fears with violence in the Middle East and the continuing bloody Ukraine war.
The Biden administration has touted its economic plan as working, but high interest rates have American consumers concerned about a range of financial issues from loans to credit cards. The Fed raised those rates to combat inflation caused by the Biden administration’s own policies.