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As Inflation Declines, U.S. Economy Shows Exceptional Growth at 3.3% in Q4

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By Aakansha Malia

January 30, 2024
3:35 pm
Los Angeles, CA

As inflation pressure which had touched a four-decade high in 2022, subsides further in the United States, positive economic data emerged on January 25, indicated that Quarter 4 showed strong economic performance. The Gross domestic product increased at a 3.3% annualized rate last quarter after advancing at a 4.9% pace in the third quarter. At a time when the world is witnessing an economic downfall with the European Union struggling due to unexpected weakness in Germany, China and Japan both not delivering high figures, the United States shook the world by performing exceptionally well as the data showed the economy growing at a rate of 3.1% at the course of the year, fastest in two years. The stronger-than-expected growth happened alongside low unemployment which has remained below 4% for

The stronger-than-expected growth happened alongside low unemployment which has remained below 4% for 23 straight months, the longest such streak since the 1960s and rising wages as the economy created 2.7 million jobs in 2023. Part of the economy’s stamina reflects labor market resilience, marked by low layoffs and strong wage gains, which are underpinning consumer spending, also supported by rising exports, government spending and business investment. Americans also spent a lot on healthcare, recreational goods and vehicles. The housing sector had little to add to the GDP growth, however, the inventory investment did have a small contribution to it. The U.S. Commerce Department showed on January 26 that the rate of consumer price increases is now at its lowest point in more than two years.

U.S. President Joe Biden who is seeking a second term in office, hailed the fresh government data on January 26 and said “Our economy grew by more than 3% in 2023, while inflation has been at 2% in the second half of the year, and unemployment remained below 4% for a second year. This means significant progress for American workers — with wages, wealth and employment all higher than they were four years ago.” Joe Biden pointed out that over the second half of 2023, inflation rose at an annualized rate of 1.9%, below the Fed’s long-term target rate of 2% which he said would be ”more breathing room for working families.”

Fate of Interest Rates

The strong economic performance which seems to have spilled into this year suggests that it will be too soon for the Central Bank to start cutting interest rates, according to what experts say. Experts predict that central bank will not be changing current 5.25%-5.50% range of policy rate at its meeting on January 30-31st. However, rate cuts this year are on the cards as inflation cools. Olu Sonola, head of U.S. regional economics at Fitch Ratings in New York said, “Whichever way you slice it, this report caps a year of stellar economic growth performance, particularly with the backdrop of the Fed’s aggressive monetary policy tightening cycle. The momentum of economic growth going into 2024 is looking very good.”

The latest data release of the U.S. economy expanding at a strong pace is said to affect the upcoming presidential elections in November. As Americans feel better about a steady decline in inflation and rising economic growth, a trend that could sustain consumer spending, and fuel economic growth, it is bound to potentially affect voters’ decisions.