⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

US Economy Grew Faster Than Expected in Q4, Raising Hopes for a Soft Landing

Published 25/01/2024, 19:53
Driven by robust consumer spending, US GDP grew faster than anticipated in Q4 2023.

The US gross domestic product (GDP), a key indicator of economic growth, grew slower in Q4 than the previous quarter but surpassed economists’ estimates. Consumer spending was the primary catalyst behind the expansion, raising the likelihood of a soft landing.

GDP Grew 3.3% in Q4 and 2.5% in the Entire 2023

The US economy exhibited a 3.3% annual growth rate in Q4, down from the 4.9% reading in the prior quarter but still above economists’ expectations. According to the Commerce Department, the consensus estimate was 1.7%, while models from the Federal Reserve Bank of Atlanta and the New York Fed predicted 2.4%.

For the entire 2023 year, real GDP saw a 2.5% increase in 2023, outperforming the estimated 2.4% growth and the 1.9% uptick observed in 2022.

The primary driver of this growth was consumer spending on both goods and services, highlighted Kathy Jones, Chief Fixed Income Strategist at Charles Schwab (NYSE:SCHW).

Compared to the same period in the previous year, GDP witnessed a 3.1% increase, providing further evidence of the US economy’s resilience despite historically high interest rates. The overall annual growth rose to 2.5%, a notable improvement from the 1.9% recorded in 2022. Jones characterized this performance as “remarkable,” especially considering escalating borrowing costs.

Soft Landing Still Possible

Despite elevated interest rates and inflation, consumer spending remains a consistent driver of the US economy’s growth. Notably, according to the University of Michigan, consumer sentiment reached its highest level since July 2021 in January.

Damian McIntyre, portfolio manager at Federated Hermes (NYSE:FHI), thinks that robust consumer sentiment has further alleviated recession risks and increased the odds of the much-discussed soft landing.

“The consumer, boosted by a strong job market and wage growth, has trounced last year’s recession fears. This report likely reduces rate cuts in 2024 and is another strong indication that Jerome Powell could get his soft landing.”

– wrote Damian McIntyre, portfolio manager at Federated Hermes.

A soft landing refers to a gradual and controlled slowdown in economic growth engineered by central banks to prevent overheating without triggering a recession.

Moderating inflation is another factor that could help the Fed achieve this goal. Despite a few unexpected upticks, the consumer price index (CPI) has been on an overall downtrend since reaching a 4-decade high in June 2022.


Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.