US GDP grows more than expected at 3.3% in Q4 of 2023

US GDP grew more than expected at 3.3% in Q4 of 2023, government data showed, boosted by a resilient jobs market and consumer spending. That’s much higher than the 2% expectation from economists polled by Dow Jones. Both S&P futures and Nasdaq futures edged higher in pre-market trading. The final three months of 2023 caps a resilient year for US economy as President Joe Biden's reelection campaign picks up pace. The full-year growth was 2.5%, according to the Commerce Department.

"The increase in real GDP reflected increases in consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment, and residential fixed investment," the department said in a statement. "The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were food services and accommodations as well as health care. Within goods, the leading contributors to the increase were other nondurable goods (led by pharmaceutical products) and recreational goods and vehicles."

The data further supports the belief that the United States is experiencing a "soft landing," where higher interest rates lead to a reduction in inflation without triggering a harmful recession. Initially, analysts expected a slowdown in consumer spending in 2023 due to reduced savings from the Covid-19 pandemic and elevated borrowing costs. Despite concerns about a possible recession, the economy has shown resilience, particularly in the labor market.


Highlighting the surprising strength in the labor market, Nationwide's chief economist Kathy Bostjancic told AFP that job and wage gains supported consumer spending. However, challenges remain, with weakened employment growth in certain sectors and interest rates remaining at a 22-year high, economists said. Analysts anticipate slower growth in 2024, with the labor market's stability crucial for continued expansion. Residential investment is expected to play a larger role, aided by potential interest rate reductions and homebuilders capitalizing on lower mortgage rates and a stagnant existing-home market.

No hint of rate cut from ECB

Earlier today, the European Central Bank (ECB) opted to keep interest rates unchanged for the third consecutive time, despite a gradual decline in inflation. This decision, following a series of rate hikes aimed at curbing post-Russia's war in Ukraine price surges, keeps the ECB's benchmark deposit rate at a historic high of four percent. Although widely anticipated, the pause prompts speculation about potential future rate cuts as inflation eases and the eurozone economy faces challenges.

The ECB's governing council however reiterated in its statement that it believed rates are at levels that "maintained for a sufficiently long duration, will make a substantial contribution" to returning inflation to the two-percent target.