The US economy maintains its strength, growing by 0.8% in the fourth quarter Economy

The scenario of experts, including Federal Reserve experts, predicted that the United States would enter a recession in the latter part of 2023. However, driven by the strength of consumption, the world's leading economy defied all expectations and resisted policy tightening. Monetary policy is much stronger than expected. GDP grew by 0.8% (at a 3.3% annual rate) in the fourth quarter of the year, according to the first estimate Published Thursday by the Bureau of Economic Analysis. Depends on the Ministry of Commerce. Thus, the US economy grew by 2.5% for the full year.

Fourth-quarter growth represents a slowdown compared to 1.2% quarterly (4.9% annually) for the third quarter, when the economy suddenly accelerated and grew at the highest rate since 2021, but it is still a dynamic development of economic activity and exceeds analysts’ expectations. The data, which will be revised twice as additional information arrives, shows that consumption remains the driver of expansion.

The increase in real GDP reflects increases in consumer spending on goods and services, exports, state and local government spending, nonresidential fixed investment, federal government spending, investment in private inventories, and residential fixed investment. Imports, which remain included in the GDP calculation, also rose.

In 2023 as a whole, real GDP rose by 2.5% (from the annual level in 2022 to the annual level in 2023), compared with an increase of 1.9% in 2022. The growth mainly reflects increases in consumer and fixed non-residential spending. Investment, state and local government spending, exports, and federal government spending, which were partially offset by declines in fixed residential investment and investment in inventories. Imports decreased. Therefore, the economy accelerated, contrary to all expectations.

The US Federal Reserve made the largest interest rate increases since the 1980s to address inflation, which was also the highest in four decades. Its Chairman, Jerome Powell, has so far achieved the desired soft landing for the economy, that is, reducing inflation without causing a recession. Savings accumulated during the pandemic and strong job creation have contributed to this better-than-expected development. Despite increases in interest rates, international conflicts, banking unrest, strikes and other setbacks, the US economy remained strong throughout 2023.

Now, the US central bank is preparing to start cutting interest rates, but without excessive haste. Members of the Federal Reserve's Monetary Policy Committee in December predicted a 0.75 point decline in money prices throughout 2024, although it is not clear when the first move will occur. Powell is expected to provide some clues after the Fed's meeting next week.

The expectations of members of the US Central Bank’s Monetary Policy Committee for the year 2024, which were published in December, expect the desired scenario: growth of 1.4%, an unemployment rate of 4.1%, and inflation approaching the 2% target.

Thus, the US economy enters into gear in 2024, the election year in which President Joe Biden will seek re-election. Growth, industrial investments, infrastructure and job creation are some of the economic balancing assets of his presidency. However, the high inflation he suffered during the first three years of his presidency still influenced the minds of voters. Inflation has fallen, but prices have not, and consumers see that when they go to the supermarket or gas station.

Tom Barkin, president of the Federal Reserve Bank of Richmond, warned this month of risks to growth and inflation. “A soft landing is increasingly possible, but by no means inevitable. I see four risks. The US economy could run out of fuel. We could face unexpected disruptions. Inflation could stabilize at a level higher than our target of 2 %.The decline may be delayed if the US economy continues to defy expectations. He noted in a speech in Raleigh (North Carolina).

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