US economy grew at a shocking pace in the fourth quarter

The US economy remained shockingly robust in the fourth quarter to close out a remarkably strong 2023 as consumers and businesses continued to spend.

Gross domestic product, a measure of all the services and goods and produced, rose at a seasonally adjusted, annualized 3.3% rate from October through December, the Commerce Department reported Thursday.

That was slower than the 4.9% rate from July through September, when American consumers splashed out on services and goods. Growth in 2023 overall registered at a robust 2.5% rate.

The fourth quarter’s rate trounced the 1.5% that economists were expecting, according to FactSet estimates. The economy’s strength in the final months of 2023 was broad based, driven by consumer spending, business investment, government outlays, exports and improvements in housing conditions.

Consumer spending, which accounts for about two-thirds of the US economy, grew at a healthy 2.8% rate in the fourth quarter, a slightly softer pace than the 3.1% rate in the prior three-month period. Meanwhile, business spending accelerated to a 1.9% rate, up from 1.4%.

Thursday’s GDP report shows that the US economy has cooled some in recent months, but it’s not clear if that was enough of a slowdown to keep the Federal Reserve on track to cut interest rates any time soon.

Fed Governor Christopher Waller, an influential official at the central bank, said in a speech earlier this month that if “economic activity that seems to have moderated in the fourth quarter of 2023 does not play out” then that could delay rate cuts. Market expectations of that first rate cut coming in March have been crumbling in recent weeks.

This story is developing and will be updated.