introduction
The U.S. economy grew faster than expected in the fourth quarter, creating a surprise surprise for a year that was thought to end in a recession. The data showed that the U.S. economy grew by 2.5% in 2023, up from 1.9% in the previous year.
Despite signs of cooling in the labor market, consumer resilience and business investment have boosted optimism about the future of the U.S. economy.
Exceed the expected rate of economic growth
According to data released by the U.S. Bureau of Economic Analysis, the preliminary annualized quarterly rate of real GDP in the United States in the fourth quarter recorded 3.3%, exceeding expectations of 2%. Although it slowed down from the previous value of 4.9%, it still reached the lowest level since the second quarter of 2023.
This means that the U.S. economy will grow by 2.5% in 2023, up from 1.9% last year. Consumers' personal consumption expenditures also came in at 2.8%, beating expectations of 2.5%, indicating consumer confidence in the economy.
The labor market is showing a cooling
However, it is worth noting that the labor market is showing signs of cooling. The latest data showed that initial claims for unemployment benefits reached 214,000 in the week to Jan. 20, the highest level since Dec. 23, 2023.
Although this figure was higher than the expected 200,000, the previous value was revised up from 187,000 to 189,000, indicating some growth. This situation may require further observation to determine its impact on future economic development.
How the market reacts to the data
After the release of the data, the market reacted differently. Short-term interest rate futures rose as traders ramped up bets on a Fed rate cut. At the same time, the gold market also saw a short-term long and short double kill, but then quickly recovered losses and refreshed intraday highs. These reactions show the market's focus on the direction of the US economy and its expectations for the future.
Consumer resilience and business investment enablement
The latest GDP data highlights the resilience of the U.S. consumer and the boost of business investment. Despite two consecutive quarters of declines in durable goods spending, experts say there could be signs of recovery in 2024.
In addition, last quarter's data also showed an easing of inflationary pressures, which led to widespread expectations that the Fed will start cutting interest rates in the first half of this year. This expectation further strengthens the market's confidence in the economy.
Expert opinion
In response to the unexpected growth of GDP data, experts have expressed their opinions. Brian Jacobsen, chief economist at Annex Wealth Management, noted that although the GDP data exceeded expectations, there were still some weaknesses, such as a decline in durable goods spending and personal consumption expenditures inflation below the Fed's target.
However, he believes that the Fed should not rush to cut interest rates, but should consider the timing of rate cuts more prudently. Peter Cardillo, chief market economist at Sparta Capital Securities, said that the better-than-expected fourth-quarter GDP growth bodes well for a soft landing and may prompt the Fed to keep interest rates steady until the third or fourth quarter of 2024.
epilogue
Despite the challenges facing the labor market, the U.S. economy ended 2023 on a faster-than-expected growth rate. Consumer resilience and business investment have provided a strong foundation for the U.S. economy and confidence in the future.
As inflationary pressures ease, market expectations for Fed rate cuts are also increasing. However, experts caution the need to be cautious and choose the right time to adjust interest rates. Overall, the U.S. economy has maintained its momentum in the new year, laying the foundation for steady expansion in the future.