In the fourth quarter of 2023, the GDP—a measure of all goods and services produced—grew at an annualized pace of 3.3%. Wall Street had anticipated a gain of 2%.
The U.S. economy expanded at an annualized rate of 2.5% over 2023, higher than the 1.9% growth in 2022 and far ahead of the Wall Street prediction at the start of the year for little to no improvements.
According to Thursday’s GDP data, the US economy has slowed down somewhat in recent months. Still, it’s unclear if this slowdown was significant enough to prevent the Federal Reserve from lowering interest rates anytime soon.
The Gross Domestic Product is a comprehensive measure of U.S. economic activity. GDP measures the value of the final goods and services produced in the United States (without double counting the intermediate goods and services used to make them). Changes in GDP are the most famous indicator of the nation’s overall economic health.
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Compared to the third quarter of 2023, the deceleration in real GDP in the fourth quarter primarily reflected slowdowns in private inventory investment, federal government spending, residential fixed investment, and consumer spending. Imports decelerated. Current-dollar GDP increased 4.8 percent at an annual rate, or $328.7 billion, in the fourth quarter to $27.94 trillion. GDP grew by 8.3 percent in the third quarter, or $547.1 billion (tables 1 and 3). The price index for gross domestic purchases increased 1.9 percent in the fourth quarter, compared with an increase of 2.9 percent in the third quarter (table 4). The personal consumption expenditures (PCE) price index increased 1.7 percent, compared with a rise of 2.6 percent. Excluding food and energy prices, the PCE price index increased 2.0 percent, the exact change in the third quarter.
According to Commerce Department data released on Thursday, the Federal Reserve’s primary inflation rate remained modest in the fourth quarter despite a much smaller than anticipated slowdown in US GDP growth. Following the announcement, which increased the likelihood of a short-term Fed shift to rate cuts, the S&P 500 increased slightly to reach another record close.
Chances of a Federal Reserve Rate Cut
Markets were putting in 47% odds of a quarter-point rate drop by the Federal Reserve at the March 20 meeting following Thursday’s report, up from 41% on Wednesday. The likelihood of a rate decrease by the May 1 meeting increased from 82% to 89%.
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