US economy grew at a surprisingly strong 3.3% pace last quarter, pointing to continued resilience

WASHINGTON -- The nation's system grew astatine an unexpectedly brisk 3.3% yearly gait from October done December arsenic Americans showed a continued willingness to walk freely contempt precocious involvement rates and terms levels that person frustrated galore households.

Thursday's study from the Commerce Department said the gross home merchandise - the economy's full output of goods and services - decelerated from its sizzling 4.9% maturation complaint the erstwhile quarter. But the latest figures inactive reflected the astonishing durability of the world's largest economy, marking the sixth consecutive 4th successful which GDP has grown astatine an yearly gait of 2% oregon more.

Consumers, who relationship for astir 70% of the full economy, drove the fourth-quarter growth. Their spending expanded astatine a 2.8% yearly rate, for items ranging from clothing, furniture, recreational vehicles and different goods to services similar hotels and edifice meals.

The GDP study besides showed that contempt the robust gait of maturation successful the October-December quarter, inflationary measures continued to ease. Consumer prices roseate astatine a 1.7% yearly rate, down from 2.6% successful the 3rd quarter. And excluding volatile nutrient and vigor prices, alleged halfway ostentation came successful astatine a 2% yearly rate.

The authorities of the system is definite to measurement connected people's minds up of the November elections. After an extended play of gloom, Americans are starting to consciousness somewhat amended astir ostentation and the system - a inclination that could prolong user spending, substance economical maturation and perchance impact voters' decisions. A measurement of user sentiment by the University of Michigan, for example, has jumped successful the past 2 months by the astir since 1991.

There is increasing optimism that the Federal Reserve is connected way to present a uncommon "soft landing" - raising borrowing rates capable to chill growth, hiring and ostentation yet not truthful overmuch arsenic to nonstop the system into a tailspin. Inflation touched a four-decade precocious successful 2022 but has since edged steadily little without the achy layoffs that astir economists had thought would beryllium indispensable to dilatory the acceleration of prices.

The system has repeatedly defied predictions that the Fed's assertive involvement complaint hikes would trigger a recession. Far from collapsing past year, the system accelerated - 2.5%, up from 1.9% successful 2022.

"We proceed to forecast an ongoing enlargement successful economical enactment implicit coming quarters, said Rubeela Farooqi, main U.S. economist astatine High Frequency Economics.

Eventually, she cautioned, higher borrowing rates whitethorn dampen user spending and GDP. But she added that "there could beryllium immoderate upside to economical maturation arsenic the Fed starts to chopped rates this twelvemonth and fiscal and recognition conditions ease.

The economy's outlook had looked acold bleaker a twelvemonth ago. As precocious arsenic April 2023, an economical exemplary published by the Conference Board, a concern group, had pegged the likelihood of a U.S. recession implicit the adjacent 12 months astatine adjacent to 99%.

Even arsenic ostentation successful the United States has slowed significantly, wide prices stay astir 17% supra wherever they were earlier the pandemic erupted 3 years ago, which has exasperated galore Americans. That information volition apt rise a pivotal question for the nation's voters, galore of whom are inactive feeling the lingering fiscal and intelligence effects of the worst bout of ostentation successful 4 decades. Which volition transportation much value successful the statesmanlike election: The crisp driblet successful ostentation oregon the information that astir prices are good supra wherever they were 3 years ago?

The Fed began raising its benchmark complaint successful March 2022 successful effect to the resurgence successful ostentation that accompanied the economy's betterment from the pandemic recession. By the clip its hikes ended successful July past year, the cardinal slope had raised its influential complaint from adjacent zero to astir 5.4%, the highest level since 2001.

As the Fed's complaint hikes worked their mode done the economy, year-over-year ostentation slowed from 9.1% successful June 2022, the fastest complaint successful 4 decades, to 3.4% arsenic of past month. That marked a striking betterment but inactive leaves that ostentation measurement supra the Fed's 2% target.

The advancement truthful acold has travel astatine amazingly small economical cost. Employers person added a steadfast 225,000 jobs a period implicit the past year. And unemployment has remained beneath 4% for 23 consecutive months, the longest specified streak since the 1960s.

The erstwhile red-hot occupation marketplace has cooled somewhat, easing unit connected companies to rise wage to support oregon pull employees and past walk connected their higher labour costs to their customers done terms hikes.

It's happened successful possibly the slightest achy way: Employers are mostly posting less occupation openings alternatively than laying disconnected workers. That is partially due to the fact that galore companies are reluctant to hazard losing workers aft having been caught flat-footed erstwhile the system roared backmost from the little but brutal 2020 pandemic recession.

Another crushed for the economy's sturdiness is that consumers emerged from the pandemic successful amazingly bully fiscal shape, partially due to the fact that tens of millions of households had received authorities stimulus checks. As a result, galore consumers person managed to support spending adjacent successful the look of rising prices and precocious involvement rates.

Some economists person suggested that the system volition weaken successful the coming months arsenic pandemic savings are exhausted, recognition paper usage nears its limits and higher borrowing rates curtail spending. Still, the authorities reported past week that consumers stepped up their spending astatine retailers successful December, an upbeat extremity to the vacation buying season.

Joe Brusuelas, main economist astatine the taxation and consulting steadfast RSM, said helium thinks user spending is adjacent stronger than the retail income study indicated. Brusuelas suggested that the authorities information "did not adequately capture'' accrued vacation splurging connected question and different services.